The U.S. Consumer Financial Protection Bureau on Tuesday handed Wells Fargo & Co. the biggest civil penalty ever imposed by the watchdog as part of a $3.7 billion settlement to settle allegations of improper general management of car loans, mortgages and bank accounts.
The consumer watchdog order the bank to pay a civil penalty of $1.7 billion and an additional $2 billion to repair more than 16 million customer accounts affected by the violations, the regulator said in a statement.
The bank illegally charged fees and interest on car loans and mortgages, wrongfully repossessed cars and imposed illegal overdraft fees, among other issues, the CFPB said.
“Wells Fargo is a repeat offender that puts a third of American households at risk,” CFPB Director Rohit Chopra told reporters at a press briefing. “We are concerned that the bank’s product launches, growth initiatives and other efforts to increase profits have delayed needed reform.”
He added that regulators should consider applying additional limitations to the bank beyond the $1.95 trillion asset cap. US Federal Reserve imposed in 2018, which Federal Reserve Chairman Jerome Powell said will remain in place until the company’s problems are resolved.
Wells Fargo shares fell about 1% in the early afternoon trade.
“While we do not view today’s action as having a direct reading of the asset cap and its potential removal, we would view today’s announcement as a sign of positive progress towards that ultimate goal.” , Jefferies analyst Ken Usdin said in a note.
Wells Fargo said the settlement would resolve issues that have been outstanding for several years and noted in a statement that it had “accelerated corrective actions and corrective actions” since 2020.
“This far-reaching agreement is an important step in our work to transform Wells Fargo’s operating practices and put these issues behind us,” Charlie Scharf, the bank’s chief executive, said in a statement. statement.
HHISTORY OF VIOLATIONS
The Wells Fargo fine is the latest in a series of actions that underscore the CFPB’s more aggressive posture under President Joe Biden’s administration.
Tackling corporate recidivism has become a key priority under Biden, who entered the White House in early 2021. Last year, the Justice Department implemented a series of policy changes aimed at better deter repeat misconduct.
The CFPB and other banking regulators have taken several enforcement measures against Wells Fargo – including consent decrees that legally bind the bank to remedy violations through his business lines.
There are currently nine consent orders open against the company, outcome of a sales scandal that broke publicly in September 2016. Two of the consent orders will be terminated in three years if Wells Fargo confirms to regulators that it has made the required remedies.
In 2020, the Office of the Comptroller of the Currency (OCC) banned former Wells Fargo CEO John Stumpf from banking and fined him $17.5 million to settle charges that it would not have put an end to the faults of sale.
Wells Fargo’s management team and board of directors have changed dramatically since then, implementing new incentives and risk management procedures. Scharf became CEO in 2019, the fourth person to lead Wells Fargo since the scandal broke.
Chopra noted that the agreement does not provide any immunity for individuals, although officials declined to elaborate.
“We have made significant progress over the past three years and are a different company today,” Scharf said. “We remain committed to doing the right thing for our customers.”
Wells Fargo expects to book an expense of about $3.5 billion in fourth-quarter earnings, including costs for the CFPB fine, customer remediation and litigation, the company said. He will report the results on January 13.
Mike Calhoun, president of the Center for Responsible Lending (CRL), praised the CFPB’s “laser focus on consumer protection” in a statement.
“Wells Fargo is a repeat offender for abusive customer practices, and it is critical that the CFPB hold the lender accountable for its unlawful conduct,” Calhoun said.
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