Wells Fargo agreed to pay $56.85 million to settle a class action lawsuit alleging that the bank falsely reported California mortgage borrowers as being in forbearance to credit reporting agencies — even when those borrowers had never requested or been placed in forbearance. The inaccurate reports damaged credit scores and made it harder for affected homeowners to refinance their mortgages or obtain new credit during a period when interest rates were at historic lows.
Status: Settlement Reached — $56.85 Million
What Did Wells Fargo Do?
When the COVID-19 pandemic hit in early 2020, Congress passed the CARES Act to provide financial relief to Americans. One important provision of the law required mortgage servicers to offer forbearance — a temporary pause on mortgage payments — to borrowers who requested it. The law also included credit reporting protections: if a borrower entered forbearance, the servicer was required to continue reporting the account as current rather than delinquent.
Wells Fargo took this process and broke it in the opposite direction. Instead of protecting borrowers who legitimately entered forbearance, the bank reported borrowers as being in forbearance when they were not. Homeowners who were making their mortgage payments on time every month suddenly found their credit reports showing a forbearance status they never requested and did not know about.
The false forbearance notations triggered significant problems:
- Credit score damage — while a forbearance notation under the CARES Act was not supposed to lower credit scores, many lenders and underwriting systems treated any forbearance flag as a negative factor when evaluating loan applications
- Refinancing denied — borrowers who tried to refinance their mortgages to take advantage of record-low interest rates in 2020 and 2021 were turned away because the false forbearance status disqualified them under standard underwriting guidelines
- New credit applications rejected — the forbearance flags also affected applications for auto loans, credit cards, and other forms of credit
- Seasoning requirements — even after Wells Fargo corrected the errors, many lenders require a waiting period of 3 to 12 months after a forbearance ends before they will approve a new mortgage, costing borrowers additional time and money
Who Is Affected?
The settlement class includes California residents who held a mortgage serviced by Wells Fargo and were inaccurately reported to credit bureaus as being in forbearance. The class period covers the time frame during and after the CARES Act forbearance provisions were in effect, roughly from March 2020 onward.
If you had a Wells Fargo mortgage during this period and noticed an unexpected forbearance notation on your credit report, you may be a class member. Many borrowers did not discover the error until they applied for a refinance or new loan and were denied.
How Much Could You Receive?
The $56.85 million settlement fund will be divided among eligible class members based on the harm they experienced. Borrowers who can demonstrate that they were denied a refinance or other credit product because of the false forbearance reporting may receive higher payments than those who did not suffer a specific, documented financial loss.
The exact per-person amounts will depend on the total number of valid claims filed and the settlement administrator’s evaluation of each claim. Given that this case is limited to California borrowers, the class size is smaller than a nationwide case, which could mean more substantial individual payments.
Why This Case Matters Beyond Wells Fargo
The CARES Act was supposed to be a safety net for Americans during an unprecedented economic crisis. When a major bank misapplies the very provisions designed to protect borrowers, it undermines the entire purpose of the legislation. This case sent a message to the mortgage servicing industry that credit reporting obligations under the CARES Act carry real consequences.
Wells Fargo, of course, is no stranger to consumer scandals. The bank has paid billions in fines and settlements over the past decade for issues ranging from the fake accounts scandal to auto insurance overcharges to improper mortgage fee practices. This settlement adds to a pattern of systemic failures in how the bank handles its own customers’ accounts.
What the CARES Act Actually Required
For context, here is what the CARES Act credit reporting rules actually said mortgage servicers were supposed to do:
- If a borrower requested forbearance, the servicer had to grant it for up to 180 days, with the option to extend for another 180 days
- During forbearance, the servicer had to report the account to credit bureaus as current — not delinquent, not in forbearance — as long as the account was current before the forbearance began
- If a borrower did not request forbearance, the servicer had no reason to change the reporting status of the account at all
Wells Fargo’s error was in applying forbearance codes to accounts that should have been left alone entirely. The borrowers in this case did not ask for forbearance, did not need forbearance, and were actively making their payments. The bank’s internal systems flagged them incorrectly, and those incorrect flags were transmitted to the credit bureaus.
What Should You Do If You Were Affected?
- Check your credit reports — pull your reports from all three bureaus (Equifax, Experian, TransUnion) and look for any forbearance notations on your Wells Fargo mortgage account
- Gather documentation — if you were denied a refinance or credit application because of a false forbearance flag, save all denial letters and correspondence
- File a claim — if the claims process is open, submit your claim with supporting documentation to maximize your potential payment
- Dispute errors — if incorrect information is still on your credit report, file a dispute directly with the credit bureaus and with Wells Fargo
- Consult an attorney — if you suffered significant financial harm, you may have grounds for an individual claim beyond the class settlement
Case Details
| Defendant | Wells Fargo Bank, N.A. |
| Allegation | Falsely reporting California mortgage borrowers as in forbearance, violating FCRA and CARES Act |
| Settlement Amount | $56.85 million |
| Class Members | California mortgage borrowers with false forbearance reporting |
| Key Laws | Fair Credit Reporting Act (FCRA), CARES Act |
| Status | Settled |
By Steve Levine | Published: February 18, 2026
Legal Disclaimer
This article is for informational purposes only and does not constitute legal advice. OpenClassActions.org is not a law firm and does not represent any party in this litigation. If you believe you were harmed by inaccurate credit reporting, consult with a qualified attorney to understand your legal options. Settlement terms are subject to court approval and may change.