The United States Consumer Financial Protection Bureau (CFPB) has slapped Wells Fargo & Co with the watchdog’s largest ever civil penalty as part of a $3.7bn agreement to settle charges over widespread mismanagement of car loans, mortgages and bank accounts.
On Tuesday the consumer watchdog ordered the bank to pay a $1.7bn civil penalty, and another $2bn to redress more than 16 million consumer accounts affected by the violations, the regulator said in a statement.
The bank illegally charged fees and interest on auto loans and mortgages, had cars wrongly repossessed and imposed unlawful, surprise overdraft fees, among other issues, the CFPB said.
“Wells Fargo is a corporate recidivist that puts one-third of American households at risk of harm,” CFPB director, Rohit Chopra, told journalists in a briefing.
He added that regulators should consider whether to apply additional limitations on the bank beyond the $1.95 trillion asset cap the Federal Reserve imposed in 2018, which Federal Reserve Chair Jerome Powell has said will remain in place until the firm’s problems are fixed.
Shares of Wells Fargo were down about one percent in late morning trading.
“While we do not see today’s action as having a direct read-through to the asset cap and its potential removal, we would take today’s announcement as a sign of positive progress on moving toward that ultimate goal,” Ken Usdin, an analyst at Jefferies, wrote in a note.
Wells Fargo said the settlement will resolve issues that have been outstanding for several years and noted in a statement that it has “accelerated corrective actions and remediation” since 2020.
“This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us,” Charlie Scharf, the bank’s chief executive officer, said in a statement.
Tackling corporate recidivism
The fine for Wells Fargo is the latest in a series of actions that underscore the CFPB’s more aggressive posture under President Joe Biden’s administration.
Tackling corporate recidivism has emerged as a key priority under Biden, who entered the White House in early 2021. Last year, the justice department rolled out a series of policy changes aimed at better deterring repeat misconduct.
Wells Fargo has faced multiple enforcement actions taken by the CFPB and other banking regulators for violations across the bank’s business lines. There are currently nine open consent orders against the company.
Wells Fargo also remains under an unprecedented $1.95 trillion asset cap, as well as consent orders with regulators stemming from a sales scandal that publicly erupted in September 2016.
In 2020, the Office of the Comptroller of the Currency (OCC) banned former Wells Fargo CEO John Stumpf from the banking industry and fined him $17.5m to settle charges he failed to put an end to sales misconduct.
Wells Fargo’s management team and board have changed dramatically since then, implementing new incentives and risk-management procedures. Scharf became CEO in 2019, the fourth person to lead Wells Fargo since the scandal emerged.
Chopra noted that the agreement does not proe any immunity for any indiuals, although officials declined to elaborate.
“We have made significant progress over the last three years and are a different company today,” Scharf said. “We remain committed to doing the right thing for our customers.”
The litigation, customer remediation and regulatory matters “could result in significant additional expense in the coming quarters”, Wells Fargo said in a third-quarter earnings filing. It will report fourth-quarter results on January 13.
