Class Action Lawsuit Claims Wells Fargo Illegally Seizes Deposit Account Funds When Open-End Credit Loans Are Not Timely Paid

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A California piano teacher has filed a proposed class action lawsuit against Wells Fargo over the bank’s alleged practice of illegally seizing funds out of a customer’s deposit account should the individual fail to timely pay an open-end credit loan.

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The 27-page Wells Fargo class action lawsuit alleges the bank unlawfully seizes the funds of consumers who have both a deposit account and open-end credit with the bank without regard to state rules that govern bank liens and bank levies, and without court approval or notice to the customer. 

According to the suit, Wells Fargo’s conduct will sometimes leave a customer with no money left in their account to meet their basic needs and is outlawed under the federal Truth In Lending Act, among other laws.

The plaintiff, a young adult, says she fell behind on credit card payments several years ago, and Wells Fargo sued the consumer and obtained a judgment against her for the outstanding credit card debt, the filing shares. Per the complaint, state law affords a process by which the bank may enforce the judgment via a levy on the plaintiff’s bank accounts, yet that process requires Wells Fargo to provide the consumer with notice, an opportunity to file a claim of exemption, and a minimum amount of money left in her account, the suit relays.

As of February 2023, a deposit account balance of at least $1,900 was protected from a bank levy under California law, the case says. However, on February 2 of that year, Wells Fargo, without authorization or a chance for the plaintiff to be heard, withdrew $284.03 from the consumer’s savings account and $181.41 from her checking account and applied the funds as payment to itself on the woman’s open-end credit card debt, the lawsuit shares.

“In blatant disregard of these rules, Wells Fargo skipped the legal process for a bank levy, which would have prevented it from taking any money out of [the plaintiff’s] accounts, and instead unlawfully helped itself to her funds and leave [sic] her with only $102.74 to her name,” the case shares.

Specifically, the Truth In Lending Act decrees that, with limited exceptions, a card issuer may not take any action against a cardholder’s deposit accounts to offset indebtedness from a consumer credit transaction, the filing states.

According to the complaint, Wells Fargo is aware that its practice of seizing deposit account funds to satisfy open-end credit debts is illegal, and will sometimes refund a consumer when they complain to a regulator, but the bank has “nonetheless continued its unlawful offsetting practice and takes advantage of those who either do not have the time, energy or resources to complain.”

Though the plaintiff repeatedly contacted Wells Fargo, on her own and through an attorney, to ask for her money to be returned, the bank gave the plaintiff the runaround, the lawsuit says. At the time of the suit’s filing, the plaintiff still had not received her money back from Wells Fargo, the suit claims.

The Wells Fargo lawsuit looks to cover all California residents who have had the bank withdraw and use funds from their Wells Fargo deposit accounts to offset balances owed on Wells Fargo open-end consumer credit accounts within the last four years.

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