Wells Fargo pays $3.7 billion for mistreating customers

(Bloomberg) — Wells Fargo & Co. reached a $3.7 billion settlement with federal regulators, including a record $1.7 billion fine, to cover allegations that it abused millions of customers for years, leading some to lose their cars or homes.

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The agreement with the Consumer Financial Protection Bureau includes more than $2 billion in “recourse to consumers,” the CFPB said Tuesday in a statement citing “widespread mismanagement” of auto loans, mortgages and deposit accounts.

“Wells Fargo’s cycle of purging and repeat breaking the law has harmed millions of American families,” CFPB executive director Rohit Chopra said in the statement. “The CFPB is ordering Wells Fargo to pay back billions of dollars to consumers across the country. This is an important first step towards accountability and long-term reform of this repeat offender.”

Under Chief Executive Officer Charlie Scharf, Wells Fargo has attempted to resolve a series of scandals that surfaced in 2016 with the revelation that the bank had opened millions of fake accounts. Troubles surfaced across all business areas, resulting in the impeachment of two CEOs and a number of costly fines, including the Federal Reserve’s decision to curtail the company’s assets.

The bank set aside $2 billion in the third quarter to cover a variety of regulatory and legal issues, including healing aggrieved customers. Scharf warned in October that the indictment “is not the end”.

“We and our regulators have identified a range of unacceptable practices that we have been systematically seeking to change and provide remedial action for clients where appropriate,” Scharf said in a separate statement. “This far-reaching agreement is an important milestone in our work to transform operations at Wells Fargo and move beyond these challenges.”

The bank agreed to a consent order with the CFPB without admitting the agency’s allegations.

Wells Fargo said it expects a pre-tax operating loss of about $3.5 billion in the fourth quarter, including the CFPB civil fine and recovery, as well as other litigation costs.

Shares of the company rose 0.7% to $42.11 at 9:57 a.m. in New York.

Houses lost

According to the agency, Wells Fargo illegally seized vehicles, messed up payment records, and falsely charged fees and interest. It said service failures by the bank occurred from at least 2011 through 2022.

As for home loans, the CFPB said the bank erroneously denied mortgage modifications over a seven-year period, with some customers losing their homes. The bank illegally charged overdrafts and in more than 1 million cases it illegally froze consumer accounts “based on a faulty automated filter that identified a possible fraudulent deposit.”

Chopra has previously vowed to make corporate punishments more painful. In 2016, the San Francisco agency Wells Fargo fined $100 million for opening accounts without client consent. In 2018, it imposed a $1 billion sanction for collateral misconduct, but gave the bank a $500 million loan for a simultaneous settlement with the Office of the Comptroller of the Currency.

Chopra, appointed by President Joe Biden, is under pressure from progressives in the Democratic Party to revive the consumer watchdog, which they say has backed away from tougher policymaking and enforcement under former Republican President Donald Trump.

Click here to read the bank’s authorization order.

(Updates with additional allegations in the ninth paragraph.)

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