Wells Fargo, a major player in consumer banking, agreed to pay $3.7 billion to resolve several claims that it injured customers by adding unauthorized fees and interest to mortgages and auto loans and applying overdraft penalties to savings and checking accounts wrongly.
On Tuesday, the Consumer Financial Protection Bureau imposed a $1.7 billion fine and a $2 billion consumer repayment order on Wells. The CFPB has set the highest fine to date on any bank, and it is also the most significant sanction ever imposed on Wells, which has been working for years to mend its reputation after a string of scandals related to its sales practices.
However, regulators made it plain that Wells Fargo hasn’t cleaned up its act sufficiently.
In a conference call with reporters, CFPB Director Rohit Chopra stated, “Put simply: Wells Fargo is a corporate recidivist that puts one out of three Americans at risk for possible harm.”
Chopra claimed that this pattern of conduct necessitated additional regulatory proceedings against Wells Fargo in addition to the $3.7 billion in fines and penalties.
According to the bureau, the infractions by the bank affected more than 16 million consumers.
Along with unfairly charging fees and interest to consumers of auto loans, the bank occasionally wrongfully repossessed borrowers’ vehicles.
Additionally, thousands of homeowners had their mortgage loan modifications unfairly denied by the bank.
U.S. regulators had regularly fined Wells Fargo for breaking consumer protection laws dating back to 2016 when it was discovered that workers had established millions of unauthorized accounts to reach inflated sales targets.
Wells executives have repeatedly claimed that the bank is cleaning up its act.
However, the firm has since been found to have broken other consumer protection laws, particularly in its lending operations for vehicles and mortgages.
Wells previously paid a $1 billion fine to cover several consumer law violations.
At the time, that represented the most significant fine ever imposed on a bank for breaking consumer legislation.
The bank previously informed investors that it anticipated further fines and penalties from authorities.
The bank set aside $2 billion in the third quarter to cover regulatory issues.
Wells is still subject to a Federal Reserve decree prohibiting further expansion until the Fed determines that its issues with corporate culture have been rectified.
That order was only supposed to be in effect for a year or two when it was first passed in 2018.
The deal with the CFPB is a part of the initiative to “change operating processes at Wells Fargo and to put these challenges behind us,” according to CEO Charles Scharf in a statement.