Wells Fargo ordered to pay $3.7 billion for ‘illegal activity,’ including wrongful foreclosures and vehicle repossessions


Federal regulators fined Wells Fargo $1.7 billion on Tuesday for “widespread mismanagement” for several years that damaged more than 16 million consumer accounts.

The Consumer Financial Protection Bureau said Wells Fargo’s “illegal activity” included repeatedly embezzling loan paymentswrongful foreclosure of houses, illegal repossession of vehicles, incorrectly assess fees and interest and collect surprise overdraft fees.

The CFPB ordered Wells Fargo to pay the $1.7 billion civil penalty in addition to more than $2 billion to compensate consumers for a variety of “illegal activities.”

The misconduct described by the CFPB echoes previously reported revelations that have emerged about Wells Fargo since 2016, when the bank’s fake account scandal created a national storm.

“Wells Fargo’s rinse and repeat cycle of breaking the law has harmed millions of American families,” Rohit Chopra, director of the CFPB, said in a statement.

Chopra described Wells Fargo as a “repeat offender” and said Tuesday’s fine is just an “initial step” in holding the bank accountable. That suggests Wells Fargo may not be out of the sanctions box with regulators any time soon.

The misconduct described by the CFPB echoes previously reported revelations that have emerged about Wells Fargo since 2016, when the bank’s fake account scandal created a national storm.

In a statement, Wells Fargo emphasized that the sweeping agreement with the CFPB resolves multiple issues, most of which have been “pending for several years.” The bank said the required actions “are now substantially complete.”

“We and our regulators have identified a number of unacceptable practices that we have been systematically working to change and provide remediation to customers where warranted,” Wells Fargo CEO Charlie Scharf said in the statement. “This far-reaching agreement is an important milestone in our work to transform operating practices at Wells Fargo and move past these issues.”

Wells Fargo said it expects the CFPB deal to cost it $3.5 billion before taxes in the fourth quarter.

According to the CFPB’s enforcement action, Wells Fargo had “systemic failures” in its auto loan business that damaged more than 11 million accounts. Those failures caused Wells Fargo to improperly repossess the vehicles of some borrowers, inappropriately charge fees and interest and fail to refund certain fees, regulators say.

In addition, regulators say Wells Fargo improperly denied thousands of home loan modifications, causing some customers to lose their homes to “improper foreclosures.”

“The bank was aware of the problem for years before it finally addressed it,” the CFPB said.

Wells Fargo also “illegally” charged surprise overdraft fees and “illegally” froze more than 1 million consumer accounts, blocking consumers’ access to their funds for an average of at least two weeks.

The Wells Fargo scandal that began in 2016 drew the attention of Wells Fargo treatment of employees and clients, triggering congressional hearings, countless regulatory investigations, and the eventual firing of two of the bank’s CEOs.

In her final act as Federal Reserve Chair, Janet Yellen in February 2018 threw the book at Wells Fargo imposing unprecedented fines on the bank that are still in effect today.

The CFPB said the more than $2 billion in customer refunds Wells Fargo was ordered to pay include more than $1.3 billion to consumers affected by the bank’s auto loan tactics and more than $500 million in overdraft fees. illegal surprises and other improper conduct related to deposit accounts.

Regulators said Wells Fargo has also been ordered to pay nearly $200 million in refunds to people harmed by the bank’s mortgage servicing accounts.

Going forward, the CFPB directed Wells Fargo to ensure that auto loan borrowers are reimbursed for certain additional fees and to stop charging bank account holders surprise overdraft fees.

The agency said these fees are imposed when customers have funds available at the time of purchase, but then had a negative balance once the transaction is settled.

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