Federal regulators ordered Wells Fargo to pay $3.7 billion in fines and refunds to customers, marking the largest fine to date against the nation’s third largest bank.
The fines come after the Consumer Financial Protection Bureau (CFPB) alleged Wells Fargo has illegally assessed fees and interest charges on auto loans and mortgages, wrongly repossessed customers’ cars and misapplied payments to auto and mortgage loans. The consumer watchdog agency also accused Wells Fargo of charging consumers illegal surprise overdraft fees and adding incorrect charges to checking and savings accounts.
Wells Fargo, which has spent years trying to rehabilitate itself after a series of scandals tied to its sales practices, will pay a $1.7 billion fine to the CFPB. The remaining $2 billion will go toward compensating more than 16 million customers who were impacted by the “illegal activity,” the agency said Tuesday.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” CFPB Director Rohit Chopra said in a statement.
History of repeated violations
Wells Fargo has been repeatedly sanctioned by U.S. regulators for violating consumer protections dating back to 2016, when bank employees were found to have opened millions of accounts illegally in order to meet unrealistic sales goals. In 2018, Wells Fargo paid a $1 billion penalty to cover widespread consumer law violations. At that time, it was the largest fine to date against a bank for consumer law violations.
Former CEO Tim Sloan, who once denied the phony accounts were a problem, resigned in 2019 after a punishing appearance before Congress.
Since then, Wells has spent its time saying it’s cleaning up its act, only to be repeatedly fined for additional violations. Wells Fargo has created a consumer advisory group, hired new senior leadership and taken other steps in recent years in hopes of improving its business practices, the company said Tuesday.
“As we have said before, we and our regulators have identified a series of unacceptable practices that we have been working systematically to change and provide customer remediation where warranted,” CEO Charlie Scharf said in a statement Tuesday.
Wells Fargo said its settlement with the CFPB will remedy “unacceptable practices” that have lingered at the bank for years.
Regulators: Not enough done
“We have made significant progress over the last three years and are a different company today,” Scharf said.
Regulators made it clear, however, that they believe Wells Fargo had not done enough to clean up its act.
“Put simply: Wells Fargo is a corporate recidivist that puts one out of three Americans at risk for potential harm,” Chopra said.
CFPB officials said Wells Fargo denied thousands of applicants modifications to their home loan over a seven-year period. Those denials caused some customers to lose their home in “wonderful foreclosures,” the agency said. Wells Fargo knew about the issue for years and it didn’t address it until recently, CFPB officials said.
The agency also said Wells Fargo unlawfully froze more than 1 million customer bank accounts because its automated system flagged some deposits as possibly fraudulent. Wells Fargo could have taken a different action to examine deposits, but instead customers were unable to access their funds for roughly two weeks, the CFPB said.
Wells Fargo remains under a Federal Reserve order forbidding it from growing any larger until the Fed deems that its corporate culture problems are resolved. The order, enacted in 2018, was expected to last only a year or two.
The Associated Press contributed to this report.
