Lawsuit Alleges Wells Fargo Charged Servicemembers, Military Families Excessive Interest Rates

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A proposed class action lawsuit alleges Wells Fargo has illegally and negligently charged thousands of American servicemembers and military families excessive interest rates and fees and compound interest on principal balances that were improperly inflated due to the bank’s misconduct. 

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The 29-page Wells Fargo lawsuit says that although the bank heavily markets itself as dedicated to military members, veterans and their families, it nevertheless ran afoul of the federal Servicemembers Civil Relief Act (SCRA), which guarantees that debts incurred by a servicemember before they were called to active to duty are cut to a six-percent interest rate for the duration of the active-duty period. The SCRA also requires financial institutions to permanently forgive interest above six percent and waive fees, the case notes. 

According to the suit, proposed class members did not discover that Wells Fargo was breaking the law until 2022, when the bank, after an internal audit, sent “misleading correspondence” and checks to some military families. Upon investigation, the plaintiffs learned that Wells Fargo had committed “wholesale violations” of the SCRA and its own military benefits program, financially damaging thousands of military families, the lawsuit says. 

“These violations caused damage to servicemembers, including the miscalculation of principal, interest, payoff amounts, and improper imposition of interest, fees, and other charges,” the suit alleges. 

In particular, the lawsuit accuses Wells Fargo of failing to reduce the interest rates on servicemembers’ accounts, waive fees, comply with the SCRA’s requirement that interest rate deductions are effective on the date military orders are received, and forgive incurred interest. Further, Wells Fargo has failed to maintain adequate internal systems to ensure it complied with the law and the terms of its military benefits program, the suit alleges.

According to the suit, Wells Fargo’s internal audit that uncovered that the bank had “systematically and repeatedly” violated the SCRA and its own military benefits program did not cover the entire time period during which Wells Fargo overcharged military customers. Even after uncovering the wrongdoing, the case says, Wells Fargo has never admitted to “any specific violations” or provided an accounting of the alleged overcharges.

“Instead, on information and belief, Defendant sent unsolicited refunds for overcharges,” the complaint relays.

The terms of Wells Fargo’s military benefits program include certain benefits the bank considers “more generous” than those required by the SCRA, the filing shares. The case posits that if Wells Fargo’s military benefits program was not as competitively attractive as represented by the bank, the plaintiffs and other consumers would have closed their accounts with Wells Fargo and moved to another bank. 

The suit alleges Wells Fargo is “still in possession of certain funds belonging to” impacted servicemembers, money that was apparently obtained as the result of overcharged interest. 

The Wells Fargo lawsuit looks to cover all persons who, at any time on or after January 1, 2006, received reduced interest and/or fee benefits from Wells Fargo on an interest-bearing obligation because of an obligor’s military service. 

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