Wells Fargo Settles Check-Cashing Suit

Wells Fargo & Co. announced Tuesday that it had settled a lawsuit over check-cashing fees by agreeing to make it easier for employees of small businesses to qualify for free checking accounts.

The suit, filed by Chaffee Enterprises of Bakersfield, a paging services company, alleged that Wells Fargo’s policy of charging non-customers $5 for each check cashed violated a 1911 California labor law that requires employers to provide a place where workers can cash paychecks for full face value.

Chaffee’s paychecks were drawn on a Wells Fargo account. Until April 2004, the bank did not charge Chaffee’s employees for cashing their paychecks at Wells branches -- regardless of whether the employee also had an account at Wells Fargo. But the bank changed its policy last year and began to levy the fee, spurring Chaffee’s suit.

Wells Fargo did not admit wrongdoing in the settlement, nor will it stop charging a check-cashing fee to those without accounts with the bank, said spokeswoman Julia Tunis.

The San Francisco-based bank instead agreed to provide one year of free direct-deposit services to small businesses that use its payroll service.

Employees who accept their paychecks via direct deposit will be able to set up free checking accounts with the bank. Once they’re Wells Fargo customers, the employees are not subject to check-cashing fees, Tunis said.

“Customers who don’t have Wells Fargo accounts can avoid the fees by depositing checks in accounts at their own banks,” Tunis said. “Or, they can open a Wells Fargo account. As long as you have direct deposit, there is no balance requirement for free checking.”

The settlement was nearly identical to one struck by Bank of America Corp. this year. That suit, filed by Karis House Inc. of Visalia, accused the bank of hiding the $5 check-cashing fee, and it sought millions of dollars in restitution. However, like the Wells Fargo suit, it was settled without cash payment, any admission of guilt or elimination of the fee.

Instead, Bank of America also agreed to make it easier for employees of small businesses to qualify for free checking accounts.

The suits against both banks were filed by Nicholas P. Roxborough of Roxborough, Pomerance & Nye in Los Angeles, who was not available for comment. “We are proud to have helped employers in this matter,” he said in a statement.