Wells Fargo CARES Act settlement: $56.85M Deal for California Homeowners

Wells Fargo CARES Act settlement terms have been preliminarily approved, establishing a massive $56.85 million fund to resolve allegations regarding improper credit reporting during the COVID-19 pandemic. This significant legal development in the case of Stoff v. Wells Fargo Bank N.A. addresses claims that the banking giant failed to adhere to federal and state guidelines when reporting mortgage statuses to credit bureaus. For thousands of California homeowners who sought relief under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, this settlement represents a potential financial remediation for potential credit score damage.

As of Wednesday, February 18, 2026, the settlement process is moving toward its final approval phase. Unlike many class actions that require arduous paperwork, this agreement features an automatic cash payment structure for eligible class members, streamlining the path to compensation. This article provides an exhaustive analysis of the settlement terms, eligibility criteria, and the implications for consumer credit rights.

Settlement Overview

The Wells Fargo CARES Act settlement resolves a long-running dispute centered on how the bank reported mortgage accounts during CARES Act forbearances. The class action lawsuit, filed in the Superior Court of California, County of San Diego, alleged that Wells Fargo violated the Fair Credit Reporting Act (FCRA) and the California Consumer Credit Reporting Agencies Act. The core issue was the bank’s practice of reporting accounts as "in forbearance" or similar statuses when they were legally required to be reported as "current."

Under the terms of the $56.85 million agreement, Wells Fargo denies all wrongdoing and liability but has agreed to the payout to avoid the uncertainty and expense of continued litigation. The court granted preliminary approval on January 9, 2026, setting the stage for a final fairness hearing later this year. This settlement is distinct from other recent banking litigations, specifically targeting the intersection of pandemic relief efforts and accurate credit reporting for California residents.

The Allegations: Stoff v. Wells Fargo Bank N.A.

The lawsuit, captioned Stoff v. Wells Fargo Bank N.A., was initiated by plaintiff Michael Stoff, who alleged that after requesting a CARES Act forbearance, his credit report inaccurately reflected negative information. The complaint asserted that Wells Fargo systematically reported accounts as being in forbearance to credit reporting agencies (CRAs) like Equifax, Experian, and TransUnion, even when the borrower was current on their payments at the time the accommodation was granted.

Under the CARES Act credit reporting provisions, creditors were mandated to report accounts as "current" if the borrower was current when the accommodation was made, provided the borrower adhered to the accommodation agreement. The plaintiffs argued that reporting an account as "in forbearance" acts as a derogatory mark, signaling financial distress to future lenders and potentially lowering credit scores. This practice, they claimed, violated the specific protections enacted by Congress to shield consumers from credit damage caused by the pandemic’s economic fallout.

Who Qualifies for the Class Action?

Eligibility for the Wells Fargo CARES Act settlement is strictly defined. The "Settlement Class" includes individuals who meet a specific set of criteria related to their mortgage and residency. Because this is a California mortgage class action, the property location is a primary filter.

To qualify, a class member must:

• Have a mortgage serviced by Wells Fargo on a property located in California.
• Have been "current" on their mortgage payments (defined as 0 to 29 days past due) at the time they contacted Wells Fargo to request a forbearance.
• Have received a mortgage payment forbearance under the CARES Act on or after March 27, 2020.
• Have had their account reported by Wells Fargo to a consumer reporting agency as "in forbearance" (or a similar status) despite the account being current at the time of the accommodation.

The settlement administrator has likely already identified eligible class members through Wells Fargo’s internal records. Those identified should receive a notice by mail or email. However, verifying eligibility is crucial for those who believe they fit the description but have not received notification.

Understanding the Credit Bureau Reporting Error

The central grievance in this litigation involves a credit bureau reporting error that may seem technical but has real-world consequences. The Fair Credit Reporting Act (FCRA) requires furnishers of information (like banks) to report data accurately. The CARES Act amended the FCRA to provide specific protections during the COVID-19 emergency period.

When a borrower enters a forbearance agreement, they are essentially given permission to pause payments. If they were up to date on payments before the pause, the lender must continue to report them as current. The lawsuit alleged that Wells Fargo used special comment codes or status indicators that flagged the account as being in a forbearance status. While factually true that the account was in forbearance, the plaintiffs argued that in the context of credit scoring models and manual underwriting, these flags acted as negative indicators, violating the spirit and letter of the CARES Act’s "full current status" requirement.

Pro Rata Settlement Fund and Payouts

The financial component of the settlement is structured as a pro rata settlement fund. The $56.85 million gross settlement amount will first be used to pay for administrative costs, attorneys’ fees (which can be up to 30-33% of the fund), and service awards for the class representatives. The remaining "Net Settlement Fund" will be divided equally among all participating class members.

Because the payout is pro rata, the exact amount each individual receives depends on the total number of eligible class members who do not opt out. Estimates suggest that with the high volume of California mortgages serviced by Wells Fargo during the pandemic, individual payments could range from the low hundreds to over a thousand dollars, depending on the final class size. Importantly, this is a cash payment, not a credit toward the mortgage balance, providing immediate liquidity to affected homeowners.

Automatic Cash Payment: No Claim Needed

One of the most favorable aspects of this settlement for consumers is the automatic cash payment mechanism. In many class actions, class members must file a claim form, submit proof of harm, or provide documentation of their mortgage status. In this case, because Wells Fargo possesses the data regarding which accounts were placed in forbearance and how they were reported, the process is automated.

Eligible class members do not need to file a claim. Checks will be mailed to the last known address on file with the bank or the settlement administrator. It is imperative that class members ensure their address is updated with the settlement administrator if they have moved since 2020. The checks will be valid for 90 days from the date of issuance. Uncashed checks may result in the funds being redistributed to other class members or donated to a cy pres recipient, such as the Credit Builders Alliance.

Critical Deadlines and Final Hearing

While no action is required to receive payment, class members have rights to object to or exclude themselves from the settlement. The timeline is critical for those who wish to retain their right to sue Wells Fargo individually.

• Exclusion/Opt-Out Deadline: March 25, 2026. Borrowers who want to sue Wells Fargo separately for the same claims must submit a written request for exclusion by this date.
• Objection Deadline: March 25, 2026. Class members who wish to remain in the settlement but object to specific terms (such as the attorneys’ fees) must file an objection by this date.
• Final Approval Hearing: April 17, 2026. The court will hold a hearing to determine if the settlement is fair, reasonable, and adequate. Payments will only be distributed after the court grants final approval and any appeals are resolved.

California Consumer Credit Reporting Agencies Act Context

This litigation relies heavily on the California Consumer Credit Reporting Agencies Act (CCCRAA), which mirrors the federal FCRA but often provides stronger protections for California residents. The CCCRAA mandates that creditors must ensure the completeness and accuracy of the information they furnish to credit reporting agencies.

By invoking state law alongside federal statutes, the plaintiffs were able to anchor the case in California state court (San Diego Superior Court), leading to a settlement specifically for California mortgagors. This highlights the unique legal landscape in California, where consumer protection laws are among the most stringent in the nation, often leading to substantial settlements for state residents that may not be available to borrowers in other jurisdictions.

Navigating CaresActLitigation.com

For official information, class members should rely solely on the court-approved website, CaresActLitigation.com. This site hosts the Long Form Notice, the Settlement Agreement, and other legal documents. It is the primary portal for updating contact information and understanding the nuances of the "Stoff Subclass."

Be cautious of third-party websites or scams claiming to distribute funds. The official administrator, A.B. Data, Ltd., is the only entity authorized to handle class member data and fund distribution. If you are unsure of your status or have not received a notice, you can contact the administrator directly through the official channels listed on the website.

For further reading on consumer rights and credit reporting laws, you can visit the Federal Trade Commission’s overview of the FCRA.