As part of the settlement, Wells Fargo agreed to pay $3.7 billion to settle allegations that it harmed consumers by charging illegal fees and interest on auto loans and mortgages, as well as incorrectly applying overdraft fees.
In addition to enforcing a $1.7bn penalty against Wells, the Consumer Financial Protection Bureau (CFPB) ordered the bank to repay $2 billion to consumers. The fine is the largest the CFPB has fined any bank to date, and the largest one against Wells, which has struggled to regain credibility after scandals linked to its sales practices for years.
More than 16 million customers were affected by the bank’s bad behavior. In some cases, the bank wrongfully repossessed borrowers’ cars as well as improperly charging auto loan customers fees and interest. Thousands of homeowners were also improperly denied loan modifications by the bank.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said Rohit Chopra, director of the Consumer Financial Protection Bureau.
In 2016, Wells employees were found to have opened millions of accounts illegally in order to meet unrealistic sales goals, leading US regulators to sanction the bank repeatedly.
Wells executives have repeatedly announced that the bank is cleaning up its act, only to be found in violation of other consumer protection laws, including auto lending and mortgage lending.
As a result of widespread violations of consumer law, Wells paid a $1bn penalty in 2018. It was the largest fine against a bank to date.
In the third quarter, the bank set aside $2 billion to cover potential regulatory matters. The bank had previously indicated to investors that it expected additional fines and penalties.
The Federal Reserve still prohibits Wells from growing further until its corporate culture problems are resolved. That order, originally enacted in 2018, was intended to last a year or two.
Charles Scharf, Wells Fargo’s CEO, said the agreement with the CFPB is part of Wells Fargo’s efforts to “transform its operating practices”.
