Wells Fargo’s years of mistreatment of its customers have resulted in another record-breaking fine and warnings that more restrictions on its ability to do business could soon follow.
On Tuesday, the bank agreed to pay $1.7 billion in fines and another $2 billion in restitution to settle claims it engaged in bank violations over the past decade that harmed millions of consumers, the Consumer Financial Protection Bureau said.
According to the order filed by the Consumer Protection Bureau, the bank misappropriated customer payments on home and auto loans, misappropriated some borrowers’ cars and homes and charged overdraft fees even when customers had enough money to cover purchases with their bank cards. Wells Fargo stopped the behavior this year as part of a larger effort to clean up other misconduct dating back to 2011, the filing said.
The fine is the largest ever imposed by the regulator, breaking the previous record of $1 billion. Action against Wells Fargo.
The settlement allows the bank to resolve one of a series of crises that led to the ouster of its previous chief executive, Timothy SloanIn 2019, Mr. Sloan took the top job to help clean up the bank’s reputation, which was reeling from self-inflicted scandals, but he became a lightning rod for criticism, and three years later Charles W. Scharf was hired. .
But the bank still faces other regulatory challenges, including one A consent order imposed by the Federal Reserve In 2018, it restricted its growth until it fixed several of its problems, and for similar reasons imposed limits on mortgage servicing capabilities in 2021 by the Office of the Comptroller of the Currency.
Rohit Chopra, director of the Consumer Protection Bureau, told reporters on Tuesday that the action against the bank “should not be taken as a sign that Wells Fargo has moved past its long-standing problems or that the CFPB’s work is done.”
As part of its settlement with the regulator, Wells Fargo is reimbursing customers, returning improperly charged fees and providing some financial relief to those whose finances and credit ratings were affected by the bank’s practices.
Damages, some of which the bank has already started paying, include overpayments on home and auto loans; recovering the value lost when customers had their cars taken and their homes foreclosed; And after offering auto loan customers “guaranteed asset protection” insurance, it returns the wrongfully held money, which covers the difference between their outstanding loans and the value of their vehicles, either in lump sum or repossessed.
Some types of relief have already started coming to victims of the bad practices, but other parts of the $2 billion settlement are new, including an obligation to repay $205 million in overdraft fees.
In a statement on Tuesday, bank officials stressed that the latest agreement with the regulator shows the bank’s progress in improving its business practices.
“This landmark agreement is an important milestone in our work to transform the way we operate at Wells Fargo and put these issues behind us,” said Mr. Scharf said in the statement. Wells Fargo is “a different company today,” he added.
The Consumer Protection Bureau warned that as the bank works to end and correct its latest violations, it will be closely monitored and examine whether other restrictions on the bank’s operations are necessary. The bureau will work with other banking regulators, including the Federal Reserve and the Office of the Comptroller of the Currency, Mr. Chopra said in a statement.
The fines cover Wells Fargo’s improper mortgage and auto loan fees charged to customers, as well as the bank’s practice of freezing customers’ bank accounts too quickly and closing them when automated fraud detection systems flagged unusual activity. Some practices were initiated as early as 2011, but almost all continued beyond the bank’s inception calculation with regulators over its widespread breaches that began in 2016.
“Wells Fargo’s wash-and-repeat cycle of violating the law has harmed millions of American families,” Mr. Chopra The regulator said in a statement. “This is an important initial step toward repeat offender accountability and long-term reform.”
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