Wells Fargo is facing a new lawsuit, this time from the Texas jeweler J. Edwards Jewelry Distributing and the company's president, John Silverman, for charging what the lawsuit contends were hidden fees to customers using Wells Fargo's financing programs.
According to the report in Reuters, the lawsuit, which was filed in San Francisco federal court last year, contends that Wells Fargo told retailers to build financing fees into the price of goods and advertise that purchases would be interest-free if financed. The higher price for the jewelry was actually a hidden double-digit interest charge.
The lawsuit contends that Wells Fargo violated the Truth in Lending Act, which requires the clear disclosure of finance charges. The plaintiffs are seeking class-action status so that the lawsuit can cover more than 5,000 retailers around the country.
According to the lawsuit, while the financing programs were advertised by retailers in-store and online, Wells Fargo actually controlled how merchants could talk about the programs. Retailers were told not to charge a fee for customers who use Wells Fargo financing, but that they could increase prices to cover the fees.
In one example, the lawsuit contends that a customer would pay $3,000 for a ring and pay zero interest if it was paid off in 60 months, and the retailer would give up 22.5 percent of the cost to Wells Fargo. If the customer paid for the same ring with cash, it would cost $2,325, which would have saved them $675 in what the lawsuit contends were undisclosed financing fees. The lawsuit said Wells Fargo likely earned around $800 million annually from those hidden fees.
This new lawsuit comes soon after Wells Fargo settled another one. Earlier in June, the bank announced it had received final approval from a California court to settle a class-action suit. The $142 million suit sought to compensate customers impacted by a sales scandal, Reuters reported. Wells Fargo CEO Tim Sloan called the announcement “a significant step forward in making things right for our customers and restoring trust [of all] Wells Fargo’s stakeholders.” Customers have until July 7 to claim their funds.
In May, Wells Fargo announced that it had agreed to pay $480 million to settle a securities fraud class-action suit. In a press release, the embattled bank said the lawsuit was filed in the U.S. District Court for the Northern District of California, sparked by misstatements and omissions in its discourse related to sales practices. The $480 million fine is subject to final approval by the court.