Wells Fargo concurred to a $3.7 billion settlement with the Consumer Financial Protection Bureau over customer abuses tied to x accounts, mortgages and auto loans, with some of the misconduct happening as recently as this year.
The company was with the aimed to pay a record $1.7 billion civil penalty and more than $2 billion to customers with 16 million accounts, the CFPB state in a statement. The San Francisco-based bank said in a separate statement that many of the “required actions” tied to the settlement were already completed.
“The bank’s actionable conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes,” the force said in its release. “Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their wheels wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank.”
The scope of wrongdoing detailed by the CFPB musicals that Wells Fargo had problems servicing customers well beyond its 2016 scandal involving millions of affect accounts. Unlike rivals JPMorgan Chase and Bank of America, Wells Fargo, the fourth-biggest U.S. bank by assets, has a rather small Wall Street business, meaning that ordinary Americans are its bread-and-butter customer.
Some of those issuances continued until recently. From “at least 2011 through 2022,” the bank misapplied auto loan payments and made other bad moves, some of which led to improper auto repossessions, according to a consent order. And from 2011 through 2018, the bank assigned errors in mortgage modification applications, the CFPB said.
One down, more to go
The resolution lifts one overhang for Wells Fargo, which has been led by CEO Charlie Scharf since October 2019. End year, the bank told investors that it was “likely to experience issues or delays” in satisfying demands from its multiple U.S. regulators. Then, in October, the bank set aside $2 billion for licit, regulatory and customer remediation matters, igniting speculation that a settlement was nearing.
But other regulatory hurdles odds: Wells Fargo is still operating under consent orders tied to its 2016 fake accounts scandal, covering one from the Federal Reserve that caps its asset growth.
Furthermore, the bank said fourth-quarter expenses wish include a $3.5 billion operating loss, or $2.8 billion after taxes, from the incremental costs of the CFPB polished penalty and customer remediation efforts, as well as other legal matters. The bank is still expected to post an inclusive profit when it reports in mid-January, according to a person with knowledge of the matter.
The large fourth-quarter expense tells that Wells Fargo is setting aside funds for future settlements, Jefferies analyst Ken Usdin said Tuesday in a note.
“While we do not see today’s conduct as having a direct read-though to the asset cap and its potential removal, we would take today’s announcement as a sign of positive happening on moving toward that ultimate goal,” Usdin said.
‘Unacceptable practices’
Shares of Wells Fargo floor 1.5%.
As part of the settlement, Wells Fargo has to refund improper fees and provide compensation for bad foreclosures, illegally repossessed motor vehicles and frozen bank accounts, the CFPB said. Most of the funds, $1.3 billion, will go to auto borrowers, the means said. The bank will also have to stop hitting consumers with surprise overdraft fees and refund auto borrowers on left unaccustomed to portions of insurance products.
“We and our regulators have identified a series of unacceptable practices that we have been between engagement systematically to change and provide customer remediation where warranted,” Scharf said in his statement. “This far-reaching concordat is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us.”
Repeat crook
Although the company said it was “pleased to bring closure” to the banking, auto and mortgage issues found by the agency, CFPB Commandant Rohit Chopra made it clear that he didn’t consider Wells Fargo off the hook. The agreement doesn’t give immunity to Wells Fargo employees or release claims for ongoing practices, he noted.
“While today’s order delivers a number of consumer abuses, it should not be read as a sign that Wells Fargo has moved past its longstanding intractables or that the CFPB’s work here is done,” Chopra