Wells Fargo Slapped with $1 Billion Fine
As part of a settlement announced Friday, Wells Fargo was ordered by the Consumer Financial Protection Bureau (CFPB) to pay a $1 billion fine for improper mortgage and auto lending processes. The CFPB noted Wells Fargo was charging consumers too much for mortgage interest rate-lock extensions and charging them excess car insurance fees—illegal actions that caused serious financial harm to consumers.
In a related decision, the Office of the Comptroller of the Currency issued an additional $500 million civil penalty and ordered Wells Fargo to make restitution to customers harmed by the practices in question. The OCC also called for the bank to develop and implement an effective company-wide compliance risk management program.
The OCC said in its report that shortcomings in the bank’s existing program enabled reckless, unsafe and unsound practices, and that the punitive actions against Wells Fargo reflect the severity of the bank’s misdeeds—the violations of law, the financial harm to consumers, and its failure to correct the deficiencies and violations in a timely manner.
The practices violate Section 5 of the Federal Trade Commission (FTC) Act.
This isn’t Wells Fargo’s first offense, either. Less than two years ago, Wells Fargo was fined nearly $200 million for opening unauthorized deposit and credit card accounts.
What’s more, Wells Fargo’s wealth management business is believed to be under investigation for similar offenses, and the Department of Justice is investigating the bank’s currency trading business.
In addition to having to submit for review plans detailing ongoing efforts to strengthen its compliance and risk management and its approach to customer remediation efforts, the Strib noted it will have to get approval from bank regulators before hiring senior employees.
“For more than a year and a half, we have made progress on strengthening operational processes, internal controls, compliance and oversight, and delivering on our promise to review all of our practices and make things right for our customers,” said Timothy J. Sloan, president and chief executive officer of Wells Fargo, in a prepared statement. “While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency. Our customers deserve only the best from Wells Fargo, and we are committed to delivering that.”
Given the punitive actions, the company has adjusted its first quarter preliminary financial results by a net income reduction of $800 million.