Wells Fargo ordered to pay $3.7B for illegal customer abuses
Consumer Financial Protection Bureau fines banking giant Wells Fargo for range of illegal customer misdealings, some going back years
The Consumer Financial Protection Bureau is ordering Wells Fargo to pay some $3.7 billion in penalties and remuneration following its findings that the banking giant engaged in illegal practices, some going back years, that targeted its own customers.
According to a Tuesday release from the CFPB, Wells Fargo’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes.
Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed and had payments to auto and mortgage loans misapplied by the bank, according to the bureau. Wells Fargo also charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said CFPB Director Rohit Chopra in a press statement. “The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”
Who will get Wells Fargo settlement money?
Under the terms of the order, Wells will pay $2 billion in redress to the over 16 million affected consumer accounts and pay a $1.7 billion fine, which will go to the bureau’s Civil Penalty Fund, where it will be used to provide relief to victims of consumer financial law violations.
Latest fines are for multiple Wells Fargo misdealings
The Consumer Financial Protection Bureau outlined details of issues that occurred in multiple Wells Fargo customer transaction areas:
- Unlawfully repossessed vehicles and bungled borrower accounts: Wells Fargo had systematic failures in its servicing of automobile loans that resulted in $1.3 billion in harm across more than 11 million accounts. The bank incorrectly applied borrowers’ payments, improperly charged fees and interest and wrongfully repossessed borrowers’ vehicles. In addition, the bank failed to ensure that borrowers received a refund for certain fees on add-on products when a loan ended early.
- Improperly denied mortgage modifications: During at least a seven-year period, the bank improperly denied thousands of mortgage loan modifications, which in some cases led to Wells Fargo customers losing their homes to wrongful foreclosures. The bank was aware of the problem for years before it ultimately addressed the issue.
- Illegally charged surprise overdraft fees: For years, Wells unfairly charged surprise overdraft fees — fees charged even though consumers had enough money in their account to cover the transaction at the time the bank authorized it — on debit card transactions and ATM withdrawals. As early as 2015, the CFPB, as well as other federal regulators, including the Federal Reserve, began cautioning financial institutions against this practice, known as authorized positive fees.
- Unlawfully froze consumer accounts and misrepresented fee waivers: The bank froze more than 1 million consumer accounts based on a faulty automated filter’s determination that there may have been a fraudulent deposit, even when it could have taken other actions that would have not harmed customers. Customers affected by these account freezes were unable to access any of their money in accounts at the bank for an average of at least two weeks. The bank also made deceptive claims as to the availability of waivers for a monthly service fee.
Wells Fargo’s recent history has been plagued by scandal
Wells Fargo has been sanctioned repeatedly by U.S. regulators for violations of consumer protection laws going back to 2016, when employees were found to have opened millions of accounts illegally in order to meet unrealistic sales goals, according to The Associated Press.
Since then, executives have repeatedly said Wells is cleaning up its act, only for the bank to be found in violation of other parts of consumer protection law, including in its auto and mortgage lending businesses.
Wells paid a $1 billion penalty in 2018 for widespread consumer law violations, the largest against a bank for such violations at the time.
The bank had signaled to its investors that it anticipated additional fines and penalties from regulators and set aside $2 billion in the third quarter for that reason.
Wells remains under a Federal Reserve order forbidding the bank from growing any larger until the Fed deems that its problems are resolved. That order, originally enacted in 2018, was expected to last only a year or two.
CEO Charles Scharf said in a prepared statement Tuesday that the agreement with the CFPB is part of an effort to “transform operating practices at Wells Fargo and to put these issues behind us,” per AP.
While Wells Fargo tried to frame the agreement with the CFPB as a resolution of established bad behavior, officials at the agency said some of the violations cited in Tuesday’s order took place this year.
“This should not been seen as Wells Fargo has moved past its problems,” Chopra said.