Wells Fargo has been ordered by the US consumer watchdog to pay $3.7bn over illegal activity across some of its biggest financial product lines, the latest in a series of regulatory penalties incurred by the lender.
The Consumer Financial Protection Bureau said the bank, the fourth-largest in the US by assets, must pay a $1.7bn fine for violating the law, as well as $2bn in redress for its customers, for mismanagement of mortgages, car loans and bank accounts that occurred under Wells Fargo’s current leadership.
Wells Fargo has been clawing its way back from scandal since the emergence in 2016 of its fake accounts scandal. The bank agreed to pay $3bn in criminal and civil penalties in 2020 for fraudulently opening millions of customer accounts.
“Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank,” the CFPB said of Wells Fargo’s actions in a statement on Tuesday.
The CFPB said the bank’s actions caused billions of dollars in harm to its customers, including the loss of vehicles and homes for thousands.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said CFPB director Rohit Chopra.
Wells Fargo also sprung illegal overdraft fees and other incorrect charges on cheque and savings account customers, and incorrectly froze accounts.
The bank denied mortgage modifications that should have been allowed, leading to some borrowers losing their homes. It “was aware of the problem for years before it ultimately addressed the issue”, the CFPB said.
Car loans for more than 11mn people were subjected to “systematic failures”, totalling $1.3bn in financial harm.
The bank’s third-quarter earnings took a $3bn hit from accruals to cover potential bad loans and other regulatory fallouts from its 2016 fake accounts scandal.
Wells chief executive Charlie Scharf said in a statement on Tuesday that the “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”.