Wells Fargo has agreed to pay $56.85 million to settle a class-action lawsuit alleging the bank improperly reported mortgage forbearance during the COVID-19 pandemic. The settlement, which does not admit wrongdoing, addresses claims that Wells Fargo violated the Fair Credit Reporting Act and federal CARES Act by misreporting certain mortgage accounts placed in pandemic-related forbearance.

Only California property owners with Wells Fargo mortgages who received CARES Act forbearance after March 27, 2020, are eligible for automatic payments from the settlement fund. Borrowers must have had current accounts that were reported as "in forbearance" to consumer reporting agencies. The San Diego judge will decide final approval at a hearing on April 17.

Under the CARES Act, lenders were required to report pandemic-related forbearance accounts as current to protect borrowers' credit scores. The lawsuit alleges Wells Fargo failed to comply with these requirements, potentially damaging consumers' credit during an already difficult financial period. Eligible Californians do not need to apply but must file objections by March 25 if they wish to opt out of the settlement.