Wells Fargo Faces Class Action Lawsuit Alleging Assistance to Scam-Running Companies

Wells Fargo Bank is facing a class action lawsuit filed in a federal court in California, where a group of consumers accuses the bank of knowingly facilitating scams by allowing fraudulent companies to open bank accounts.

The plaintiffs, John McCraner, Sharon Stiansen, Janet Pollard, Michael Darlington, Susan R. Landreau, and John N. Tuffield, initiated the lawsuit against Wells Fargo & Co. and Wells Fargo N.A. on July 8, 2021. They allege that they were individually defrauded by a company that conducted its banking operations with Wells Fargo.

In a ruling on March 30, U.S. District Judge Larry Alan Burns determined that the bank must face the claims that it aided companies involved in scams by enabling them to establish bank accounts. While mostly denying Wells Fargo’s request to dismiss the allegations, Judge Burns allowed the claims of aiding and abetting fraud, conspiracy to commit fraud, and violation of a California law prohibiting the receipt of stolen property to proceed.

However, Judge Burns did dismiss one claim related to California’s Unfair Competition Law, as the consumers failed to demonstrate the inadequacy of other available legal remedies in the latest version of their complaint.

According to the plaintiffs, Wells Fargo provided banking services to these scam-running businesses between 2009 and 2018. The companies in question allegedly operated online “free trial” scams, misleading customers by promising risk-free trials while surreptitiously enrolling them in costly subscriptions that would automatically charge their bank accounts at regular intervals unless actively canceled.

To facilitate these fraudulent schemes, the companies relied on merchant processing services to charge customers’ credit cards. As the plaintiffs claim, the nature of these scams made it difficult for the companies to maintain access to legitimate banking services. Higher-than-average charge disputes from customers resulted in merchant processors being reluctant to work with them.

To conceal their fraudulent activities, the companies established multiple shell companies and opened merchant accounts in the names of these shell entities. They would then conduct transactions through these shell accounts and transfer funds between accounts if one became compromised—a practice commonly known as “credit card laundering.”

The individuals behind these companies allegedly hid their personal involvement by recruiting straw owners. The plaintiffs assert that Wells Fargo complied with the companies’ requests, allowing the principals to retain control over the accounts despite not being listed as the account owners.

The lawsuit alleges that Wells Fargo received indications of misconduct during its extended relationship with these companies. The bank purportedly knew that the enterprises were defrauding merchant processors through unlawful tactics such as credit card laundering. As a result, the plaintiffs seek damages, fees, costs, and a jury trial.

In a separate development, Wells Fargo recently agreed to a $3.75 million settlement to resolve a class action lawsuit related to its alleged facilitation of the Equitybuild Ponzi scheme, which caused significant financial losses to consumers.