When the credit crisis hit in 2008, a wave of class actions followed. Those suits, filed against banks and financial institutions by everyone from shareholders to directors, are now starting to produce huge settlements. A $627 million payout to Wachovia Corporation’s investors was the largest of several multimillion-dollar settlements this summer. Given that the majority of class action suits related to the credit crisis are still pending, financial industry observers say that there could be more huge settlements in the pipeline.
The Wachovia settlement, announced in August, came from a suit brought by investors who claimed that the bank misrepresented its mortgage loan program. Other big payouts quickly followed. Washington Mutual, Inc., agreed to shell out $208.5 million to end a suit that accused it of concealing poor loan underwriting and inflating appraisals. Wells Fargo Mortgage Backed Securities settled with several retirement funds for $125 million. And National City Corporation agreed to pay $168 million to investors who claimed that the bank misled them about risky subprime loans. (Wachovia is now owned by Wells Fargo & Company; Washington Mutual, by JPMorgan Chase & Co.; and National City, by PNC Financial Services Group, Inc.)
