Wells Fargo sued for not disclosing fees during loan origination

A California borrower is accusing Wells Fargo of concealing for more than a decade that it improperly charged customers certain origination-related fees. 

The issue surfaced in 2022 when the bank sent "cryptic notices" to borrowers stating it had incorrectly assessed float fees during the loan origination process, according to a federal lawsuit filed in California by customer Lance Baird. Wells Fargo offered an apology and included cashier's checks with its notices.

However, the bank did not explain how the error occurred or provide recipients with an itemized breakdown of how the mistake affected their mortgage loan accounts, according to the lawsuit.

This made it "impossible for borrowers to determine the amount of their actual damages, including their out-of-pocket harm," the litigation claims.

Wells Fargo declined to comment on the lawsuit Thursday. 

Baird applied for a mortgage with Wells Fargo in 2010 and, more than a decade later, received a letter and a cashier's check for more than $3,000 from the bank on Dec. 29, 2022.

Over $2,000 of that amount was labeled as a refund for a float fee — a charge that allows a borrower to "float" their interest rate during the mortgage process with the option to lock it later — one the plaintiff claims he never agreed to when purchasing his property.

The letter and the enclosed cashier check is a "throw away effort by Wells Fargo to shield itself from liability for yet another illegal business practice by offering an inadequate benefit," the litigation said.

"Wells Fargo tiptoes around the issue by putting the burden on the consumer to figure out whether the amount offered was sufficient to cover the damages caused, when Wells Fargo knows they did not," the complaint filed in mid-July states. The litigation was first reported on by Law360.

The suit, which is seeking class action certification, involves more than 100 alleged members. The total amount of money at stake for the entire class is more than $5 million, not counting attorneys' fees, court costs, or interest.

Wells Fargo has faced a slew of other controversies related to its business and lending practices, including the notorious fake accounts scandal and redlining allegations that surfaced in 2022.

Earlier this year, the bank was accused of denying government-mandated COVID-19 loss mitigation options for borrowers, resulting in the forced short-sale of properties. The complaint, filed May 6, predicts there are "hundreds if not thousands" of Wells Fargo customers similarly affected by the bank's alleged negligence.