Wells Fargo Bank has been ordered to pay $3.7 billion in civil penalties and reimbursements for harming more than 16 million consumer accounts over the past few years.
CNN first reported the penalty this morning by the Consumer Financial Protection Bureau, which also included $2 billion to compensate consumers “for a range of illegal activity” and $1.7 billion as a penalty.
The CFPB is in charge of overseeing financial protection for the U.S. government. They officially charged Wells Fargo with “widespread mismanagement,” which led to misapplied loan payments, wrongfully foreclosing on homes and repossessing vehicles, illegally assessing fees and interest, and charging surprise overdraft fees.
Wells Fargo has a long history of being under scrutiny for more than five years. In 2016, Wells Fargo admitted to regulators that it had created as many as 2 million unauthorized accounts. The Associated Press reported that Wells Fargo Wells paid a $1 billion penalty in 2018, which was the largest against a bank for such violations at the time. 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. That order, originally enacted in 2018, was expected to last only a year or two.
The Consumer Financial Protection Bureau (CFPB) provided detailed information about their investigation.
- Unlawfully repossessed vehicles and bungled borrower accounts: Wells Fargo had systematic failures in its servicing of automobile loans that resulted in $1.3 billion in harm across more than 11 million accounts. The bank incorrectly applied for borrowers’ payments, improperly charged fees and interest, and wrongfully repossessed borrowers’ vehicles. In addition, the bank failed to ensure that borrowers received a refund for certain fees on add-on products when a loan ended early.
- Improperly denied mortgage modifications: During at least seven years, the bank improperly denied thousands of mortgage loan modifications, which in some cases led to Wells Fargo customers losing their homes to wrongful foreclosures. The bank was aware of the problem for years before it ultimately addressed the issue.
- Illegally charged surprise overdraft fees: For years, Wells Fargo unfairly charged surprise overdraft fees - fees charged even though consumers had enough money in their account to cover the transaction at the time the bank authorized it - on debit card transactions and ATM withdrawals. As early as 2015, the CFPB, as well as other federal regulators, including the Federal Reserve, began cautioning financial institutions against this practice, known as authorized positive fees.
- Unlawfully froze consumer accounts and mispresented fee waivers: The bank froze more than 1 million consumer accounts based on a faulty automated filter’s determination that there may have been a fraudulent deposit, even when it could have taken other actions that would have not harmed customers. Customers affected by these account freezes were unable to access any of their money in accounts at the bank for an average of at least two weeks. The bank also made deceptive claims as to the availability of waivers for a monthly service fee.
Provide more than $2 billion in redress to consumers: Wells Fargo will be required to pay redress totaling more than $2 billion to harmed customers. Specifically, Wells Fargo will have to pay:
- More than $1.3 billion to consumers with auto lending accounts.
- More than $500 million to consumers for affected deposit accounts which includes $205 million for illegal surprise overdraft fees.
- Nearly $200 million to consumers with mortgage servicing accounts.
- Stop charging surprise overdraft fees: Wells Fargo may not charge overdraft fees for deposit accounts when the consumer had available funds at the time of a purchase or other debit transaction, but then subsequently had a negative balance once the transaction settled.
- Ensure auto loan borrowers receive refunds for certain add-on fees: Wells Fargo must ensure that the unused portion of GAP contracts is refunded to the borrower when a loan is paid off or otherwise terminates early.
- Pay $1.7 billion in penalties to CFPB
Consumers who are experiencing ongoing problems with Wells Fargo, or other financial providers, can submit complaints by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
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