Fed $85M 'Pick-A-Pay' Settlement With 'Stagecoach To Hell' - Just Another Wrist-Slap?

Valparaiso University Associate Professor of Law Alan White posts on Credit Slips:

• [T]he Fed announced a settlement with Wells Fargo of claims that its subprime unit had 1) deliberately steered prime borrowers into higher-cost subprime mortgage refinancings and 2) falsified income documents to put subprime borrowers into unaffordable loans.(1)



• The settlement provides for an $85 million fine, plus an elaborate claims-based compensation procedure for victims, who may number 10,000 or more. Notably, families who lost their home in foreclosure as a consequence of Wells Fargo's illegal steering are to receive $7,000 for the loss of their home. That should cover some moving costs and a month's rent or so.



• As far as I could tell the agreement does not provide for consumers to release claims in exchange for these paltry sums, but advocates would be well advised to review settlement notices with affected consumers carefully.



• The Fed announcement touts this wrist-slap settlement as the largest consumer protection enforcement fine in its history. Ample evidence that consumer protection against financial institutions needs to be transferred to a real enforcement agency at the earliest.

Source: Fed to Wells: $7000 for Wrongful Foreclosure.

From the Federal Reserve Board:

• Press Release,


• Settlement Agreement.

(1) According to a Federal Reserve Board press release:

• Based on preliminary estimates, the amount of compensation that each eligible borrower will receive ranges between $1,000 and $20,000, but some eligible borrowers may receive less than $1,000 and others may receive more than $20,000. The number of borrowers who may receive compensation under both plans is estimated to be between 3,700 and possibly more than 10,000.