Wells Fargo WFC -1.06% & Co. struck a $3.7 billion deal with regulators to resolve allegations that more than 16 million people have been compromised with deposit accounts, auto loans and mortgages.
The settlement with the Consumer Financial Protection Bureau includes a $1.7 billion penalty, the agency’s highest fine to date, and more than $2 billion in consumer reimbursement, the regulator said Tuesday.
The Consumer Protection Agency said the bank illegally set fees and interest on car and home loans. Some consumers have illegally repossessed their vehicles, while others have been unlawfully charged overdraft fees, the agency said.
Wells Fargo’s regulatory woes continue across the board more than six years after the fake account scandal became public knowledge. Other problems later surfaced at the San Francisco-based bank, including in its lending and deposit-taking businesses.
The CFPB settlement resolves a severe penalty hanging over Wells Fargo but leaves it handcuffed by other regulators. The Federal Reserve has capped the bank’s wealth growth for nearly five years. Politicians continue to target the bank, and investors have filed a number of class-action lawsuits.
“Wells Fargo is a corporate backslider,” CFPB Director Rohit Chopra said when speaking to reporters Tuesday. He said the settlement “should not be read as a sign that Wells Fargo has overcome its longstanding problems.”
According to people familiar with the matter, the bank had been negotiating with the CFPB for months to include as many outstanding issues as possible in the settlement.
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Much of the $2 billion clean-up included in the settlement has already been paid out to customers. For example, the bank has paid $1.3 billion to 11 million customers who were having trouble servicing auto loans, the CFPB said.
Wells Fargo has been working for years to resolve a series of regulatory issues stemming from a 2016 fake account scandal. After that, other problems cropped up across the bank, including in the mortgage and auto loan businesses.
The CFPB said the bank’s actions spanned a decade. Wells Fargo misapplied auto loan payments due to technology and compliance failures from 2011 to 2022, the agency said. Home loan modification errors occurred from 2011 to 2018, the agency said.
The bank sometimes charged overdraft fees even when a customer had enough funds to complete a debit card transaction or ATM withdrawal, CFPB said. Since the beginning of last year, Wells Fargo has had to refund customers about $205 million in unrecovered fees. CFPB will oversee this process.
Mr. Chopra, an appointee to President Biden, has said he plans to target repeat offenders. “Corporate relapse has become normal and is calculated as a cost of doing business,” he said in a speech earlier this year. He has also tried to make his agency more hostile to financial firms.
The CFPB said Wells Fargo has accelerated its efforts to clean up its crime since 2020. In connection with the settlement, the agency will terminate one of the consent orders it issued to the bank in 2016, clarifying that a 2018 consent order will end no more than three years.
Wells Fargo, led by CEO Charlie Scharf, has signaled for months that it faces another hefty regulatory penalty.
Photo: Drew Angerer/Getty Images
“This far-reaching agreement is an important milestone in our work to transform Wells Fargo’s operating practices and put these issues behind us,” Chief Executive Charlie Scharf said in a statement.
Mr. Scharf was hired in 2019 to clean up the bank. He overhauled senior management, downsized staff and prioritized the redesign of the bank’s back-end systems for managing internal controls and risk.
The bank had signaled for months that it expected another hefty regulatory penalty, claiming a $2 billion fee in the third quarter related to resolving longstanding legal and regulatory issues. The bank said Tuesday it expects operating losses of $3.5 billion in the current quarter.
The bank’s shares fell about 1.5%.
Write to Ben Eisen at [email protected]
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