Wells Fargo, a consumer banking company, agreed to pay $3.7B to resolve charges it caused customers harm by charging unjustified fees and interest for auto loans and mortgages as well as improperly applying overdraft fees to savings and checking accounts.
The Consumer Financial Protection Bureau ordered Wells to pay $2 billion back to customers. It also placed a $1.7 million penalty on Tuesday against the San Francisco bank. This is the biggest fine the CFPB has ever imposed on a bank and it’s also the most severe yet against Wells. Wells spent many years trying to rehabilitate the image of the bank after a string of scandals related to sales practices.
However, regulators made clear that Wells Fargo still has a lot of work to do on this front.
Rohit Chopra (CFPB Director) said, “Put simply”: Wells Fargo’s corporate recidivist puts three Americans at potential risk of harm.
Chopra stated that regulators have had to take further actions against Wells Fargo because of its pattern of conduct. These additional measures go well beyond the $3.7billion in penalties and fines.
According to the bureau, violations affected more than 16,000,000 customers. The bank also improperly charged auto loan customers fees and interest. In some instances, it even repossessed cars. Incorrectly, the bank denied homeowners thousands of modifications to their mortgage loans.
U.S. regulators have repeatedly sanctioned Wells Fargo for violating consumer protection laws dating back to 2016. In 2016, Wells Fargo employees were discovered to have illegally opened millions of accounts in an effort to achieve unrealistic sales targets. Executives have stated repeatedly that Wells Fargo is improving its practices, but the bank was found to be in breach of various consumer protection laws, such as those governing auto lending and mortgage lending.
In 2018, Wells was penalized $1 billion for numerous violations of consumer law. This is the biggest penalty against any bank in such cases.
The bank warned its investors it expected additional penalties and fines from regulators. It also set aside $2 billion for this purpose in the third quarter.
Wells is still subject to a Federal Reserve order that prohibits the bank’s growth until it has resolved its issues. The original 2018 order was only expected to be in effect for a year.
In a prepared statement, Charles Scharf, CEO of Wells Fargo stated Tuesday that the deal with the CFPB was part of an effort “to transform operating practices at Wells Fargo” and “to put these problems behind us.”
Wells Fargo attempted to portray the agreement with CFPB in terms of resolving established bad behaviour, but CFPB officials claimed that some violations cited Tuesday were actually from this year.
Chopra stated, “This shouldn’t be seen as Wells Fargo is moving past its problems.”