Wells Fargo (NYSE: WFC) Reaches Settlement Over Deceptive Marketing Practices

Wells Fargo (NYSE: WFC) has settled charges related to deceptive marketing practices over certain mortgage products attorney generals in Arizona, Colorado, Florida, Illinois, Nevada, New Jersey, Texas, and Washington.

State attorneys general lead by Bill McCollum announced last week that Wells Fargo signed a settlement over allegations that the San Francisco-based bank engaged in deceptive marketing practices on adjustable rate mortgage loans with option payments. The agreement between Wells Fargo and the states settles allegations that Wachovia, which Wells Fargo purchased in 2009, engaged in misconduct that placed borrowers in increasingly large amounts of debt as their mortgage loan aged.

Wachovia and a company that was acquired by Wachovia known as Golden West allegedly failed to advise borrowers that only making minimum payments on the loan would not cover the amount of interest accruing on their loans. As a result, the principal balance of a borrower’s loan amount increased, resulting in higher monthly payments.

Under the settlement, borrowers will be considered for the Home Affordable Modification Program (HAMP).Wells Fargo will modify loans that do not qualify under HAMP or for borrowers that do not elect a HAMP modification, under a new program known as Mortgage Assistance Program 2 (MAP2R). Wells Fargo is also expected to reduce principal balances on these loans, costing the bank more than $772 million.

Wells Fargo & Company is a diversified financial services company. The Company provides retail, commercial and corporate banking services through banking stores located in 39 states and the District of Columbia. It provides other financial services, through subsidiaries engaged in various businesses, principally wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance, commercial finance, securities brokerage and investment banking, insurance agency and brokerage services, computer and data processing services, trust services, investment advisory services, mortgage-backed securities servicing and venture capital investment. The Company operates in three segments: Community Banking, Wholesale Banking, and Wealth, Brokerage and Retirement. As of December 31, 2009, the Company provided banking, insurance, investments, mortgage and consumer finance from more than 10,000 stores under various types of ownership and leasehold agreements.

Shares of WWFC traded down 0.19% during trading on Frida.