CNN New York –
Federal regulators fined Wells Fargo $1.7 billion on Tuesday for “widespread mismanagement” over several years that harmed more than 16 million consumer accounts.
The Consumer Financial Protection Bureau said Wells Fargo’s “illegal activity” included repeated misapplication of loan payments, wrongful home foreclosures, illegal vehicle repossessions, the incorrect assessment of fees and interest and the charging of surprise overdraft fees.
The CFPB ordered Wells Fargo to pay the $1.7 billion civil penalty on top of more than $2 billion to compensate consumers for a series 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 firestorm.
“Wells Fargo’s rinse-and-repeat cycle of violating the law has harmed millions of American families,” CFPB Director Rohit Chopra 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 penalty box with regulators anytime 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 firestorm.
In a statement, Wells Fargo stressed that the wide-ranging settlement with the CFPB resolves multiple matters, most of which “have been pending for several years.” The bank said the necessary actions are “already practically complete”.
“We and our regulators have identified a number of unacceptable practices that we have been systematically working to change and provide redress to the customer when warranted,” Wells Fargo CEO Charlie Scharf said in the statement. “This far-reaching settlement is an important milestone in our work to transform Wells Fargo’s operating practices and put these issues behind us.”
Wells Fargo said it expects the CFPB settlement 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 lending business that harmed more than 11 million accounts. Those mistakes caused Wells Fargo to improperly repossess some borrowers’ vehicles, improperly charge fees and interest and fail to refund certain fees, regulators say.
In addition, regulators say Wells Fargo improperly denied thousands of mortgage loan modifications, causing some customers to lose their homes in “wrongful foreclosures.”
“The bank was aware of the problem for years before it finally addressed the problem,” the CFPB said.
Wells Fargo also “unlawfully” charged surprise overdraft fees and “unlawfully” froze more than 1 million consumer accounts, preventing consumers from accessing their funds for an average of at least two weeks.
The Wells Fargo scandal that began in 2016 drew attention to Wells Fargo’s treatment of employees and customers, leading to congressional hearings, countless regulatory probes and the eventual ouster of two of the bank’s chief executives.
In her final act as Federal Reserve Chair, Janet Yellen in February 2018 threw the book at Wells Fargo by imposing unprecedented sanctions on the bank that remain in place today.
The CFPB said the more than $2 billion in customer refunds Wells Fargo has been ordered to pay includes more than $1.3 billion to consumers affected by the bank’s auto lending tactics and more than 500 millions of dollars for illegal surprise overdraft fees and other misconduct related to deposit accounts.
Wells Fargo has also been ordered to pay nearly $200 million in refunds to those affected by the bank’s mortgage servicing accounts, regulators said.
Going forward, the CFPB has ordered Wells Fargo to ensure that auto loan borrowers receive refunds for certain additional fees and to stop charging bank account holders surprise overdraft fees.
The agency said these fees are imposed when customers have available funds at the time of purchase, but then had a negative balance once the transaction was settled.