It is not illegal to collect funds up-front for an appraisal. In fact, in the industry it is standard operating procedure to do so, so it sure doesn't sound like a scam run by Wells Fargo.
A loan will not fund before an appraisal is complete, if the lender required an appraisal. A loan is contingent on the appraisal demonstrating a certain value.
If the borrower does not have something in writing that states he or she is due a refund of the appraisal fee should the loan not go through, he or she has no real recourse.
However, I recommend you call Wells Fargo Customer Service and try to convince them that a refund is a small price to pay to assure that you will consider patronizing Wells Fargo in the future. I am not optimistic, however, that you will be successful, but it never hurts to try.
I hope this information helps you Find. Learn & Save.