On Dec. 20, the CFPB ordered Wells Fargo to pay $3.7 billion in fines and customer restitution for the bank’s mismanagement of auto loans, mortgages, and deposit accounts. As part of the settlement, Wells Fargo will pay a $1.7 billion civil penalty and another $2 billion in redress to over 16 million customers, the CFPB said in a statement.
Wells Fargo’s mismanagement caused customers to lose their homes and vehicles.
The bank illegally assessed fees and interest charges on auto and mortgage loans and misapplied payments on loans, which caused some customers to lose their homes or vehicles, the CFPB states. Wells Fargo also charged customers "unlawful surprise" overdraft fees and other "incorrect" fees to checking and savings accounts, the CFPB claims.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said CFPB Director Rohit Chopra. “The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”
Wells Fargo is a repeat offender of consumer protection laws.
This isn’t the first time Wells Fargo has gotten in trouble with the consumer protection agency. CFPB officials say that the bank is a "repeat offender" that has been the subject of "multiple enforcement actions." Other penalties against Wells Fargo include:
$3.6 million fine in 2016 for illegal student loan servicing practices
$35.7 million in 2015 for an unlawful marketing-services-kickback scheme
$100 million fine in 2016 for "widespread" illegal practice of secretly opening unauthorized deposit and credit card accounts
$1 billion settlement in 2018 for unlawful auto-loan administration and mortgage practices.
Wells Fargo officials said in a statement that the recent settlement with the CFPB resolves the bank’s “multiple matters,” many of which have been outstanding for years.
The bank is changing its "unacceptable practices."
“As we have said before, 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,” said Wells Fargo CEO Charlie Scharf in a statement. “This 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.”
The bank has made a series of changes since 2019 to help transform the way it operates. Those changes include the following:
Significant changes to senior leadership
Establishing a control management program
Launching an Office of Consumer Practice, an advisory group designed to ensure customers have a voice in consumer product decisions
“We have made significant progress over the last three years and are a different company today,” Scharf said. “We remain committed to doing the right thing for our customers and working closely with our regulators and others to deal appropriately with any issue that arises.”
The penalty will go into a victims' relief fund.
The CFPB will use the $1.7 billion in penalties from Wells Fargo for its victims' relief fund, which compensates consumers who have been harmed by violations of the federal Consumer Financial Protection Act.