Wells Fargo to Pay $3.7 Billion Settlement for Mismanagement
Wells Fargo has agreed to a $3.7 billion settlement with the Consumer Financial Protection Bureau (CFPB) to resolve accusations of consumer abuses.
KEY TAKEAWAYS
- The CFPB ordered Wells Fargo to pay $3.7 billion for reportedly mismanaging auto loans, mortgages, and deposit accounts, which resulted in billions of financial harm to its consumers and costing many their vehicles and/or homes.
- Soon after the CFPB issued its press release, Wells Fargo posted its own press release confirming it had accepted the settlement.
- Since 2018, Wells Fargo has had to settle with the CFPB (in 2018 and now in 2022), the Office of the Comptroller of the Currency (2018), and U.S. Department of Justice (2020).
Wells Fargo Fee Shatters Previous CFPB Record
On Nov. 4, 2022, a Bloomberg report was published signaling that the CFPB would order Wells Fargo to pay over $1 billion in fines for alleged mistreatment of its customers, though the settlement hadn’t been confirmed at that time. This amount would have set a new record for the federal agency, which previously fined Wells Fargo $500 million back in 2018.1
However, on Tuesday, the CFPB announced in a press release that Wells Fargo would be required to pay an amount far greater than originally expected, with the order including over $2 billion in redress to consumers and a $1.7 billion civil penalty, the latter of which will go to the CFPB’s Civil Penalty Fund. Wells Fargo will also be required to stop charging surprise overdraft fees and ensure auto loan borrowers receive refunds for certain add-on fees.2 In its own press release, Wells Fargo confirmed it had agreed to the settlement.3
Wells Fargo’s Recent Regulatory Strife
According to the CFPB, Wells Fargo committed the following legal violations:2
- Unlawfully Repossession of Vehicles and Bungling of Borrower Accounts: Wells Fargo incorrectly applied borrowers’ auto loan payments and, as a result, improperly charged fees and interest as well as wrongfully repossessed borrowers’ vehicles. It also failed to refund borrowers for certain fees on add-on products when a loan ended early. These failures in the servicing of auto loans resulted in $1.3 billion in financial harm across over 11 million accounts.
- Improper Denial of Mortgage Modifications: Over a seven-year period (at least), Wells Fargo improperly denied thousands of mortgage loan modifications, which led to wrongful foreclosures that cost some customers their homes. The financial services company was allegedly aware of this issue for years prior to it finally addressing the problem.
- Illegally Charging Surprise Overdraft Fees: Wells Fargo unfairly charged surprise overdraft fees on debit card transactions and ATM withdrawals for years, despite the fact that consumers had enough money in their account to cover the transaction at the time the bank authorized it.
- Unlawfully Freezing Consumer Accounts and Mispresenting Fee Waivers: The bank froze over 1 million consumer accounts due to a faulty automated filter flagging potentially fraudulent deposits, preventing customers from accessing their money in Wells Fargo accounts for two weeks on average. In addition, the financial services company made deceptive claims as to the availability of waivers for a monthly service fee.
This isn’t the only time Wells Fargo has had to settle with federal regulators in the past few years. In addition to the $500 million payment to the CFPB in 2018 over a myriad of abusive practices across its auto and mortgage lending divisions, the financial services company also had to pay $500 million to the Office of the Comptroller of the Currency as part of the same settlement.1 And in 2020, Wells Fargo agreed to a $3 billion settlement with the U.S. Department of Justice after opening millions of accounts without its customers’ permission.
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