Wells Fargo Worker Canned for Defrauding a Laundry Machine Paves Way for Class-Action Suit (Updated)

eggers Wells Fargo Worker Canned for Defrauding a Laundry Machine Paves Way for Class Action Suit (Updated)If a person wanted to conceive a story to make increased financial regulation look stupid, he might dream up something like this:

In 1963, a 19-year-old college student put a cardboard cut-out of a dime in a laundry machine, was spotted by a local sheriff, convicted on fraud charges, sentenced to 15 days in jail. Nearly 50 years later, the ex-con, now a low-level bank employee, gets flagged by a background check mandated by a new federal regulations, loses his job.Except you wouldn’t have to make it up. An Iowa man named Richard Eggers had been working in a Wells Fargo mortgage call center for seven years when an Federal Deposit Insurance Corp. a federally-mandated backgrounder turned up his half-century old cardboard-dime conviction. Mr. Eggers may have the most sympathetic case, but he’s hardly the only small fry bank employee to be laid off for an old conviction.

According to the Des Moines Register, banks have been firing low-level employees such as Mr. Eggers since federal bank-employment guidelines went into effect in May 2011, with an uptick when mortgage-employment rules took effect in February:

The tougher standards are meant to weed out executives and mid-level bank employees guilty of transactional crimes, like identity fraud or mortgage fraud, but they are being applied across-the-board thanks to $1-million-a day fines for noncompliance.

The bank fired Mr. Eggers, Mr. Eggers got a lawyer, and now, according to The Register, he’s filed state and federal civil rights complaints against Wells, the company that conducted the background check and the FDIC—clearing the way for a class action lawsuit.

Update: Andrew Gray , deputy to the chairman of the FDIC, emailed The Observer to point us to a letter he wrote The Register clarifying the federal law that led to Mr. Eggers dismissal. An excerpt:

There is a combination of other factors that have had the effect of subjecting more individuals to the requirements of Section 19, resulting in a temporary increase in waiver applications to the FDIC. These include the increasing number of mergers between banks and non-banks, such as mortgage companies or securities firms, which subjects more individuals to Section 19 coverage, and the passage of the U.S. Secure and Fair Enforcement for Mortgage Licensing Act of 2008, commonly known as the SAFE Act.

This law requires all residential mortgage loan originators to register with the Nationwide Mortgage Licensing System and Registry. As part of the registration, mortgage originators are required to submit to the FBI fingerprints on their employees. In some cases, these fingerprint examinations have uncovered old criminal offenses covered by Section 19, necessitating after-the-fact applications to the FDIC.

The entire letter.