Wells Fargo Proposes to Settle Auto Insurance Case for $386M

Wells Fargo & Company WFC plans to pay about $386 million in order to settle a class-action lawsuit filed by customers in 2017, accusing the bank of forcing unwanted auto insurance, without their knowledge, at the time they took car loans.

The lawsuit had stated that rise in expenses due to the insurance pushed roughly 270,000 Wells Fargo customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions.

The bank, which had denied of any wrongdoing, is still going forward with the settlement in a bid to avoid additional risks, cost and distractions of litigation.

The proposed settlement, which was filed in the federal court in Santa Ana, CA, awaits judges’ approval. Per the filing, National General, an auto insurance underwriter, will pay an additional $7.5 million.

The bank acknowledged the move to be “an important step” toward making things right for customers. Wells Fargo will be sending individualized letters to customers that will clearly state the remediation amount they will receive along with a check for that amount.

Recently, Wells Fargo announced a major overhaul in the commercial banking business structure and several leadership changes. Also, it created a separate strategic execution and operations unit, via which the bank expects to better meet the demands of several unsatisfied regulators and compliance officers. Involvement in such restructuring activities reflects the bank’s commitment to improve performance.

However, post break-out of the sales scandal, Wells Fargo continues to suffer from several sanctions, including a cap imposed by the Federal Reserve on asset growth in early 2018. The mortgage business continues to witness a decline in revenues as mortgage originations and refinancing activities have slowed down due to a higher interest rate environment.

In six months’ time, shares of Wells Fargo have lost 4.5% against 6.5% growth recorded by the industry.

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Citigroup C has witnessed 2.4% upward estimate revision over the past 60 days. Also, the company’s shares have risen nearly 15% in the past six months. It has a Zacks Rank #2 (Buy) at present.

BankUnited’s BKU earnings estimates for the current year have been revised 2.5% upward over the past 60 days. Also, the company’s shares have risen 5.5% in the past six months. It carries a Zacks Rank #2.

The Zacks Consensus Estimate for JPMorgan Chase & Co.’s JPM earnings for the current year has been revised 3.6% upward over the past 60 days. Also, the company’s shares have risen nearly 8% in the past six months. It currently carries a Zacks Rank of 2.

 Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
BankUnited, Inc. (BKU) : Free Stock Analysis Report
 
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
Citigroup Inc. (C) : Free Stock Analysis Report
 
Wells Fargo & Company (WFC) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research