Department store chain Dillard’s sued Wells Fargo on Thursday (May 22), alleging that the bank breached a co-branded credit card relationship that has since ended.
Dillard’s alleges that this breach cost it tens of millions of dollars, Reuters reported Thursday, citing a “heavily redacted complaint” filed in Manhattan federal court.
Neither Dillard’s nor Wells Fargo immediately replied to PYMNTS’ request for comment.
According to the Reuters report, Dillard’s alleges that Wells Fargo became an “unwilling and incapable partner” after reaching consent orders with the Consumer Financial Protection Bureau (CFPB) and the Federal Reserve in 2016 and 2018 and then effectively abandoned the co-branded card market in June without telling Dillard’s.
Dillard’s also alleges that Wells Fargo’s “bad-faith conduct” continued during the termination process that followed, per the report.
The department store announced in a January 2024 press release that it, Citi and Mastercard entered into new credit card agreements in which Citi would purchase the existing Dillard’s credit card accounts and Mastercard would serve as the exclusive payment network for co-branded cards for Dillard’s customers.
The release said that the new co-branded card would replace the existing one and that Citi would provide customer service and other functions related to the program.
“Our customers expect and deserve the highest level of customer care at Dillard’s and that includes providing premium credit services,” Dillard’s President Alex Dillard said in the January 2024 press release.
“We are confident we have aligned ourselves with the best in the business to offer first-class credit choices and exceptional cardholder experiences at Dillard’s for years to come.”
Wells Fargo has been struggling with regulatory issues for the better part of a decade following the “fake accounts” scandal at the bank in 2016. The Federal Reserve also placed an asset cap on the lender in 2018.
In April, Wells Fargo said the CFPB terminated a consent order related to the bank’s compliance risk management program. The order was issued in 2018 and was the 12th consent order closed by regulators since 2019 and the sixth since the start of the year.
The bank’s efforts to regain compliance have fostered hopes that the asset cap could soon be lifted.
