Wells Fargo to Pay $3.7 Billion for Mistreating Customers
(Bloomberg) — Wells Fargo & Co. agreed to a $3.7 billion settlement with the Consumer Financial Protection Bureau to settle a variety of allegations of mistreating customers, including a $1.7 billion fine that’s the biggest in CFPB history.
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The agreement includes more than $2 billion in “redress to consumers,” the CFPB said in a statement Tuesday that cited “widespread mismanagement” of auto loans, mortgages and deposit accounts.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” CFPB Director Rohit Chopra said in the statement. “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.”
Under Chief Executive Officer Charlie Scharf, Wells Fargo has been trying to resolve a raft of scandals that began in 2016 with the revelation that the bank opened millions of bogus accounts. Problems surfaced across business lines, resulting in the ousters of two CEOs and a number of costly penalties, including the Federal Reserve’s decision to cap the firm’s assets.
The bank set aside $2 billion in the third quarter to cover a variety of regulatory and legal issues, including making harmed customers whole. Scharf warned in October that the charge “isn’t the end of it.”
“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,” Scharf said in the company’s 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.”
Wells Fargo said it expects a pretax operating loss of about $3.5 billion in the fourth quarter, which includes the CFPB civil penalty and remediation, as well as other litigation expenses.
Shares of the company fell 2.7% to $40.70 at 9:16 a.m. in early New York trading.
Chopra has previously vowed to make punishments of large firms more painful. In 2016, the agency fined San Francisco-based Wells Fargo $100 million for opening accounts without customers’ permission. In 2018, the agency imposed a $1 billion sanction for additional misconduct, but gave the bank a $500 million credit for a concurrent settlement with the Office of the Comptroller of the Currency.
Chopra, appointed by President Joe Biden, is under pressure from progressives in the Democratic party to reinvigorate the consumer watchdog, which they say pulled back from tougher policy making and enforcement under former Republican President Donald Trump.
To read the bank’s consent order, click here.
(Updates with company statement in sixth paragraph.)
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