Wells Fargo will pay $1 billion to federal regulators to settle charges tied to misconduct at its mortgage and auto lending business, the latest punishment levied against the banking giant for wide…
Wells Fargo will pay $1 billion to federal regulators to settle charges tied to misconduct at its mortgage and auto lending business, the latest punishment levied against the banking giant for widespread customer abuses.
In a settlement announced Friday, Wells will pay $500 million to the Office of the Comptroller of the Currency, its main national bank regulator, as well as a net $500 million to the Consumer Financial Protection Bureau. The fine is the largest ever imposed by the CFPB and its first since the Trump administration took control of the bureau in late November. Related Articles
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The nation’s third-largest bank — and the largest in Minnesota by deposit market share — also submitted to an order Friday that would give the Office of the Comptroller of the Currency the right to remove some of the lender’s executives or board members.
The OCC said it “reserves the right to take additional supervisory action, including imposing business restrictions and making changes to executive officers or members of the bank’s board of directors.” The agency could also veto potential executive candidates.
Additionally, the Federal Reserve cracked down on Wells earlier this year by restricting it from growing larger than the $1.95 trillion in assets that it held at the time and requiring the bank to replace several directors on its board. The Federal Reserve cited “widespread abuses” for taking such an action.
“While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency,” said Wells Fargo CEO Tim Sloan in a statement Friday.
Starting in September 2016, Wells has admitted to a number of abusive practices across multiple parts of its business that duped consumers out of millions of dollars. Regulators, in turn, have fined Wells several times and put unprecedented restrictions on its ability to do business, including forcing the bank to replace directors on its board. Even President Trump, whose administration has been keenly focused on paring back financial regulations, has called out Wells for its “bad acts.”
In Friday’s announcement, the CFPB and the OCC penalized Wells for improperly charging fees to borrowers who wanted to lock in an interest rate on a pending mortgage loan and for sticking auto loan customers with insurance policies they didn’t want or need. The bank admitted that tens of thousands of customers who could not afford the combined auto loan and extra insurance payment fell behind on their payments and had their cars repossessed.
These abuses are separate from Wells Fargo’s well-known sales practices scandal, where employees opened as many as 3.5 million bank and credit card accounts without getting customers’ authorization. The account scandal torpedoed Wells Fargo’s reputation as the nation’s best-run bank.
In that case, Wells Fargo paid a combined $187 million in fines and penalties to federal regulators, including the CFPB, and the Los Angeles City Attorney’s office, and the company’s then-CEO John Stumpf stepped down after being bashed by politicians on both side of the aisle.
Even with the latest settlement, Wells Fargo isn’t in the clear. Its wealth management business is reportedly under investigation for improprieties similar to those that impacted its consumer bank. And the Department of Justice is investigating the bank’s currency trading business.
The $500 million paid to the Comptroller of the Currency will go directly to the U. S. Treasury, according to the order. The $500 million paid to the CFPB will go into the bureau’s civil penalties fund, which is used to help consumers who might have been harmed in other cases. Wells has previously said it began reimbursing auto loan and mortgage customers last year.
The settlement imposes further restrictions on Wells Fargo’s business, a sign that regulators have lost patience with the bank’s promises to turn itself around. Wells will need to come up with a risk management plan to be approved by bank regulators, and get approval from bank regulators before hiring senior employees. The OCC said in a statement that one reason for the size of the fine against Wells was “the bank’s failure to correct the deficiencies and violations in a timely manner.”
The $500 million fine matches the largest fine ever handed out by the Comptroller of the Currency against HSBC in 2012.
This report contains information from Bloomberg.
