The scandal-laden megabank has begun taking steps to undo the damage caused to more than half a million consumers
Two federal financial regulators are fining megabank Wells Fargo $1 billion for charging mortgage borrowers unreasonable fees and forcing customers into buying car insurance they didn’t need.
Announced by the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) on Friday, April 20, this is the most severe penalty by the Trump administration against a Wall Street bank.
According to the CFPB, Wells Fargo violated the Consumer Financial Protection Act by implementing a mandatory auto insurance program that added extra costs to some borrowers’ auto loans. The bank also charged some customers too much over mortgage interest rate-lock extensions.
“I am especially pleased that we were able to work closely and effectively with our colleagues at the OCC, and I appreciate the key role they played in the negotiations,” CFPB Acting Director Mick Mulvaney said in a statement. “As to the terms of the settlement: we have said all along that we will enforce the law. That is what we did here.”
Wells Fargo was fined $500 million by each agency and will have to pay its penalty to the CFPB in 10 days; the OCC did not specify a deadline.
The CFPB said that the $1 billion fine is part of a settlement with the bank, which apologized last year for charging some 570,000 consumers for auto insurance they didn’t need.
A previous internal review by Wells Fargo discovered that about 20,000 of those consumers possibly defaulted on car loans and had their cars repossessed because of the unnecessary extra insurance costs.
According to the two agencies’ filings on the bank, Wells Fargo’s “conduct caused and was likely to cause substantial injury to consumers.”
According to financial regulators, Wells Fargo has already begun remediating affected consumers and will undertake internal activities related to its risk management and compliance management.
Wells Fargo CEO Timothy Sloan said that the bank is making moves toward “delivering on our promise to review all of our practices and make things right for our customers.”
This scandal is only one of a slew of scandals the bank has faced in the last few years. In addition to upcharging customers with inflated mortgage fees and forcing the purchase of unnecessary auto insurance, Wells Fargo received intense pushback for the 2016 account fraud scandal wherein millions of fraudulent savings and checking accounts were created on behalf of Wells Fargo clients without their consent.
The CFPB fined Wells Fargo more than $185 million over the account fraud scandal, which the CFPB called “the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts.”
Because of the penalties, Wells Fargo said that it will be adjusting its preliminary financial results for the first fiscal quarter of 2017, dropping its net income to $4.7 billion, an $800 million shift in its balance sheet.
House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and the committee’s ranking Democrat Rep. Maxine Waters (D-Calif.) said on Friday that, in addition to issuing fines, those at the top should be punished further.
“It is not enough to hold a bank accountable. The actual individuals responsible for the wrongful deeds must be held responsible as well,” Hensarling said in a statement, adding that the bank “has many dedicated employees” who “had nothing to do with the wrongful acts.”
Waters also said that the “fines are not sufficient in addressing the pattern of illegal behavior by Wells Fargo, and this action still does not put the bank’s past behavior to rest. Steeper penalties are still necessary.”
