On Tuesday, federal regulators fined Wells Fargo $1.7 billion for “widespread mismanagement” over multiple years that harmed over 16 million consumer accounts. The Consumer Financial Protection Bureau (CFPB) described the bank’s “illegal activity” as including repeated misapplication of loan payments, wrongful foreclosures on homes, illegal repossessions of vehicles, incorrect assessment of fees and interest, and charging surprise overdraft fees.
This is not the first time Wells Fargo has faced controversy and regulatory action. In 2016, the bank was embroiled in a scandal involving the creation of fake accounts, which resulted in Congressional hearings, numerous regulatory probes, and the eventual ouster of two of the bank’s CEOs. Wells Fargo is not among the lenders that we work with to originate mortgages.
In addition to the $1.7 billion fine, the CFPB ordered Wells Fargo to pay more than $2 billion to compensate consumers for the range of “illegal activity” it engaged in. This includes over $1.3 billion to consumers affected by the bank’s auto lending tactics, and more than $500 million for illegal surprise overdraft fees and other misconduct related to deposit accounts. The CFPB also ordered the bank to pay almost $200 million in refunds to those harmed by its mortgage servicing accounts.
The CFPB described Wells Fargo as a “repeat offender” and said the fine was just an “initial step” towards holding the bank accountable. This suggests that further penalties may be forthcoming. In a statement, Wells Fargo CEO Charlie Scharf emphasized that the settlement with the CFPB resolves multiple matters, most of which have been “outstanding for several years.” Scharf said the required actions are “already substantially complete” and described the settlement as an “important milestone” in the bank’s efforts to “transform the operating practices” and put the issues behind it.
Wells Fargo has also been ordered by the CFPB to make sure that auto loan borrowers receive refunds for certain add-on products, and to submit to independent audits of its compliance with the order. The bank estimates that the settlement will cost it $3.5 billion before taxes in the fourth quarter. With nearly $1.8 trillion in assets, this fines are in the 0.2% range.
If you feel that you’ve been harmed by Wells Fargo behaving like Wells Fargo, this is their internal Customer Redress webpage. If you do not trust Wells Fargo to regulate Wells Fargo, retaining the services of a lawyer may be in order. If you’d like a free consultation with us, please click here (we originate mortgages and have no influence with Wells Fargo).
This latest action by regulators highlights the need for banks and those in the mortgage industry to prioritize ethical behavior and customer protection. It is crucial for financial institutions to ensure that they are complying with the law and treating their customers fairly, in order to avoid such significant fines and reputational damage.
Source: CNN and CFPB.