The Consumer Financial Protection Bureau said Wells Fargo’s illegal activity included repeatedly misapplying loan payments, wrongfully foreclosing on homes, illegally repossessing vehicles, incorrectly assessing fees and interest, and charging surprise overdraft fees.
The CFPB ordered Wells Fargo to pay the USD 1.7 billion civil penalty in addition to more than USD 2 billion to compensate consumers for a range of ‘illegal activity’. CFPB officials say this is the largest penalty imposed by the agency.
Officials also made clear that Wells Fargo is not nearly out of the penalty box with regulators. For instance, the settlement does not provide immunity for individuals at Wells Fargo, and the agency recognises the USD 3.7 billion in fines and restitution will not fix the bank’s problems.
Hinting at further penalties ahead, the CFPB official said regulators ‘must consider whether additional limitations need to be placed on Wells Fargo’ beyond the unprecedented asset cap imposed in 2018.
The misconduct described by the CFPB echoes previously reported revelations that have emerged about Wells Fargo since 2016 when the bank’s fake-accounts scandal created a national firestorm.
The Wells Fargo scandal that began in 2016 drew a spotlight to Wells Fargo’s treatment of employees and customers, triggering Congressional hearings, countless regulatory probes, and the eventual ouster of two of the bank’s CEOs.
In her final act as chair of the Federal Reserve, Janet Yellen in February 2018 threw the book at Wells Fargo by imposing unprecedented penalties on the bank that remain in place today.
In a statement, Wells Fargo emphasised that the broad-reaching settlement with the CFPB resolves multiple matters, most of which have been ‘outstanding for several years’. The bank said the required actions are ‘already substantially complete’.
Wells Fargo said it expects the CFPB settlement will cost it USD 3.5 billion before taxes in the fourth quarter.
According to the CFPB’s enforcement action, Wells Fargo had ‘systemic failures’ in its auto loan business that harmed more than 11 million accounts. Those failures caused Wells Fargo to wrongfully repossess some borrowers’ vehicles, to improperly charge fees and interest, and to fail to refund certain fees.
Moreover, regulators say Wells Fargo improperly denied thousands of mortgage loan modifications, causing some customers to lose their homes in ‘wrongful foreclosures’.
Wells Fargo also ‘illegally’ charged surprise overdraft fees and ‘unlawfully’ froze more than 1 million consumer accounts, blocking consumers from accessing their funds for an average of at least two weeks.
The CFPB said the more than USD 2 billion in customer refunds Wells Fargo has been ordered to pay includes more than USD 1.3 billion to consumers hurt by the bank’s auto lending tactics and more than USD 500 million for illegal surprise overdraft fees and other misconduct related to deposit accounts.
Regulators said Wells Fargo has also been ordered to pay almost USD 200 million in refunds to those harmed by the bank’s mortgage servicing accounts.
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