SAN FRANCISCO- Federal regulators penalized Wells Fargo with a record $3.7 billion fine last week for widespread mismanagement throughout the years that harmed over 16 million consumer accounts.
Four years removed from a massive fake account scandal, Wells Fargo is once again in hot water.
The Consumer Financial Protection Bureau said Wells Fargo’s “illegal activity” included repeatedly misapplying loan payments, wrongfully foreclosing on homes, illegally repossessing vehicles, and charging questionable overdraft fees.
Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” Rohit Chopra, the CFPB’s director, said in a statement.
Wells Fargo (WFC) was mandated by the CFPB to pay a $1.7 billion civil penalty in addition to over $2 billion in consumer restitution for a variety of "illegal activities." According to CFPB officials, this fine is the agency's largest ever.
These charges date back to 2016 when Wells Fargo fired 5,300 employees for creating millions of fake accounts.
Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses," then-CFPB director Richard Cordray said in a statement.
Aside from creating spam accounts, the bank executed a slew of other unethical practices that got them in trouble.
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, regulators say.
Regulators also said that Wells Fargo improperly denied thousands of mortgage loan modifications, causing some customers to lose their homes in “wrongful foreclosures.”
In light of the record-breaking financial penalty, the Wells Fargo chief executive officer released a statement.
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,” Wells Fargo CEO Charlie Scharf said in the statement. “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.”
Although Scharf did his best to dress this lawsuit as a mutual discovery, this is a big blow for Wells Fargo. The bank estimates that the lawsuit will cost them roughly $3.7 billion dollars to settle.
Even for a bank of this magnitude, that is a hefty price to pay. Furthermore, investors are expected to pull the plug on Wells Fargo as soon as they can, further complicating matters for the bank.
In the meantime, Wells Fargo has been ordered by the CFPB to ensure that auto loan borrowers receive refunds for certain add-on fees and to stop charging bank account holders surprise overdraft fees.
Wells Fargo has also been ordered to pay almost $200 million in refunds to those harmed by the bank’s mortgage servicing accounts.
Since this is the bank's fifth penalty in six years, it should be familiar with the settlement process.
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