Economy

Here's Why Wells Fargo Employees Are Suing Over Retirement Plans

Here's Why Wells Fargo Employees Are Suing Over Retirement Plans

In the past year, several proposed class actions have targeted financial companies that include in-house investment products in their 401 (k) plans.

A stock photograph showing the exterior of a Wells Fargo bank building in New York, New York.

Wells Fargo & Co.is trying to keep dozens of customers suing over bogus accounts opened by its employees out of court, saying they agreed to resolve any disputes in arbitration when they began doing business with the bank.

Wells Fargo workers would have earned an additional $323 million in returns if the company had offered Vanguard funds instead, according to the lawsuit.

But these forced arbitration clauses are controversial because it helps hide misbehavior by companies in private mediation rather than opening it up to scrutiny in public court documents. Wells Fargo noted in a November 23 filing that a separate judge has already ruled that arbitration agreements can be enforced in a similar class-action lawsuit in Northern California.

Congressional representatives lambasted Wells Fargo in September over concerns that the bank's check of a customers' credit histories when unauthorized credit-card accounts were opened could have hurt their credit scores.

The plaintiffs in the Utah lawsuit seek to represent other customers in a class action and to recover at least $5 million in damages from the bank.

Wells Fargo's reputation has been significantly harmed by the legal action in the aftermath of the scandal, but the bank has vowed to rebuild its customers' trust in it in a new advertising campaign.

The lawsuit also claims that Wells Fargo's own 401 (k) plan became an "important source of seed money" for the company's target date funds, accounting for about 28 percent of the funds' total assets. The scandal sparked a national outrage, congressional hearings, countless investigations and the sudden retirement of longtime CEO John Stumpf. In response to questions from Senate Democrats over this issue, Wells Fargo said it "believes that the use of arbitration is a fair and efficient process that serves the needs of both parties".

In a composed reaction to inquiries from US administrators, distributed a week ago, the bank said it would remain by its discretion strategy, yet was putting forth free intervention administrations to influenced clients.

"Wells Fargo isn't concerned about making things right with their customers". He said the bank would refund customers with damaged credit scores who got Wells Fargo loans.

The bank said it's offering "fast and free" mediation at no cost to customers through an impartial third-party.