Wells Fargo Faces Lawsuit for Violating Truth in Lending Act
A lawsuit has been filed against Wells Fargo & Company WFC alleging it to have encouraged retailers to include hidden fees in the selling price, using the bank’s financing programs. The news was reported by Reuters.
The case has been filed by El Paso, TX-based J Edwards Jewelry Distributing and its president, John Silverman, on behalf of more than 5,000 retailers in the United States District Court for the Northern District of California.
Per the complaint, Wells Fargo made the retailers advertise that customers could purchase their products with the benefit of interest-free finance programs, when in fact, the prices were already inflated with a double-digit interest charge.
Wells Fargo has been accused of violating the U.S. Truth in Lending Act, under which, lenders are supposed to disclose in details the financing charges.
Wells Fargo’s finance programs — Wells Fargo Jewelry Advantage and Wells Fargo Home Projects — were advertised at the stores and websites of retailers. However, the bank had full control of what these advertisements would contain.
Moreover, the lawsuit claims that Wells Fargo pockets nearly $800 million yearly through these hidden charges, whereas, the retailers had to pay higher sales taxes to local governments compared to what they would have paid in absence of these programs.
In the first half of 2018, Wells Fargo remained busy with settling past legal hassles while problems in new areas of operations came in focus. It also underwent restructuring of unprofitable divisions along with facing limitations on asset growth by regulators.
However, the Wall Street biggie proved its potential by clearing both tough levels of Feds stress test. The regulator’s approval to increase dividend payment and accelerate the share buyback program is likely to help the bank instill some confidence among its investors.
The stock has gained 2.1% in the past year, underperforming the industry’s rally of 7%.
Wells Fargo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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