Wells Fargo will pay $3.7 billion to settle allegations by the Consumer Financial Protection Bureau that it mismanaged auto loans, mortgages and deposit accounts, in the largest penalty ever levied by the agency.
The consent order announced by the CFPB on Tuesday is the latest in a string of woes for the scandal-plagued megabank, which in recent years has shelled out billions of dollars in fines and found itself in the crosshairs of Congress after being accused of opening up millions of fake customer accounts and other violations.
The CFPB alleged that the San Francisco-based bank illegally repossessed vehicles, charged surprise overdraft fees and froze consumer accounts, in addition to improperly denying mortgage loan modifications.
Wells agreed to the order without admitting or denying its findings. The bank will pay $2 billion in redress to more than 16 million consumers and a $1.7 billion civil penalty, the largest ever assessed by the CFPB. Of the $2 billion in restitution, $1.3 billion will go to consumers with affected auto lending accounts, $500 million to those with affected deposit accounts and nearly $200 million to those whose mortgage loans were affected.
CFPB Director Rohit Chopra said the order should be seen as an “initial step” and that it does not provide immunity for any individuals. He accused Wells executives of failing to make “rapid enough progress” to clean up the bank.
“We see this as an initial step to bring quick relief to families” affected, Chopra said on a call with reporters. “It should not be read as a sign that Wells Fargo has moved past its longstanding problems or that the CFPB’s work is done here.”
Wells is “one of the most problematic repeat offenders” the CFPB has encountered in its 11-year existence, he said.
Charlie Scharf, Wells Fargo’s chief executive officer, said in a statement that the “far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us.”
“We and our regulators have identified a series of unacceptable practices that we have been working systematically to change and provide customer remediation where warranted,” he said.
Sen. Elizabeth Warren (D-Mass.) urged federal regulators to break up the bank in the wake of the CFPB order.
“Wells Fargo has repeatedly broken the law and ripped off its customers,” Warren tweeted. “I’ve said it once, and I’ll say it again: We need to break up Wells Fargo.”
Consumer advocates echoed her call.
Better Markets President and CEO Dennis Kelleher said it was “disappointing” that the CFPB failed to sanction individuals at the company.
“Banks won’t stop breaking the law until bankers are personally and severely punished,” Kelleher said in a statement. “As important, given the repeated, egregious nature of the lawbreaking by one of the nation’s largest banks, it is past time for financial regulators to determine if Wells Fargo should be broken up.”
