Wells Fargo to Pay $3.7 Billion for Consumer Law Violations

WASHINGTON (AP) — Consumer banking giant Wells Fargo has agreed to pay $3.7 billion to settle charges that it harmed customers by charging illegal fees and interest on auto loans and mortgages, as well as falsely charging overdraft fees against savings and checking accounts.

The Consumer Financial Protection Bureau, which imposed a $1.7 billion penalty on the San Francisco bank on Tuesday, instructed Wells to reimburse $2 billion to consumers. This is the largest fine ever imposed on a bank by the CFPB, and the largest fine handed down to Wells, who spent years restoring his image after a series of scandals linked to sales practices.

But regulators have made it clear that they believe Wells Fargo needs to go further on this front.

“Simply put: Wells Fargo is a corporate criminal that puts one in three Americans at potential risk of harm,” CFPB Director Rohit Chopra said in a phone call with reporters.

Chopra said the bank’s behavior model required regulators to take additional action against Wells Fargo in fines and penalties exceeding $3.7 billion.

The bureau said the breaches affected more than 16 million customers. In addition to improperly charging fees and interest from car loan customers, the bank has in some cases wrongfully confiscated cars. The bank also improperly rejected thousands of mortgage loan changes for homeowners.

Wells Fargo has been repeatedly sanctioned by US regulators for violating consumer protection laws dating back to 2016, when employees were found to have illegally opened millions of accounts to meet unrealistic sales targets. Since then, executives have repeatedly said Wells cleared his action, only that the bank was found to have violated other parts of consumer protection law, including auto and mortgage lending businesses.

Wells paid $1 billion in fines for widespread consumer law violations in 2018; this was the largest penalty against a bank for such violations at the time.

The bank had signaled to its investors that it expected additional fines and penalties from regulators, and therefore set aside $2 billion in the third quarter.

Wells remains under a Federal Reserve order that prohibits the bank from growing any further until the Fed admits its problems are resolved. This decision, which was originally enacted in 2018, was only expected to take a year or two.

CEO Charles Scharf said Tuesday that the deal with the CFPB is part of an effort to “transform business practices at Wells Fargo and leave these issues behind.”

While Wells Fargo sought to portray the agreement with the CFPB as a solution to established misconduct, CFPB officials said some of the violations cited in Tuesday’s ruling occurred this year.

“This shouldn’t be seen as overcoming Wells Fargo’s problems,” Chopra said.

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