The US Consumer Financial Protection Bureau levied its largest-ever civil penalty against Wells Fargo & Co on Tuesday as part of a $3.7 billion settlement to resolve allegations of widespread mismanagement of bank accounts, mortgages, and auto loans.
Over 16 million customer accounts were impacted by the violations, and the consumer watchdog ordered the bank to pay a $1.7 billion civil penalty and another $2 billion to make amends.
The bank, among other things, improperly assessed fees and interest on mortgages and auto loans, had vehicles wrongfully repossessed, and tacked on surprise overdraft fees.
"Wells Fargo is a corporate recidivist that puts one-third of American households at risk of harm,” CFPB Director Rohit Chopra told journalists in a briefing. "We are concerned that the bank's product launches, growth initiatives and other efforts to increase profits have delayed needed reform."
The U.S. Federal Reserve imposed a $1.95 trillion asset cap on the bank in 2018, and Federal Reserve Chair Jerome Powell has stated that this asset cap will remain in place until the firm's issues are resolved. He continued by saying that regulators should consider whether to impose additional restrictions on the bank beyond this cap.
In the early afternoon trading, Wells Fargo shares were down about 1%.
"While we do not see today's action as having a direct read-though to the asset cap and its potential removal, we would take today's announcement as a sign of positive progress on moving toward that ultimate goal," Ken Usdin, an analyst at Jefferies, wrote in a note.
Wells Fargo noted in a statement that it has "accelerated corrective actions and remediation" since 2020 and that the settlement will address issues that have been unresolved for a number of years.
"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," Charlie Scharf, the bank's chief executive officer, said in a statement.
The most recent in a string of actions that highlight the CFPB's more aggressive stance under President Joe Biden's administration is the fine for Wells Fargo.
Dealing with corporate recidivism has become one of Biden's top priorities since he took office in early 2021. The Justice Department introduced a number of policy changes last year with the goal of better discouraging repeat offenses.
Numerous enforcement actions have been taken against Wells Fargo by the CFPB and other banking regulators, including consent decrees that bind the bank legally to address violations across all of its business lines.
Nine open consent orders have been issued against the business as a result of a sales scandal that became public in September 2016.
If Wells Fargo certifies to regulators that it has made the necessary fixes, two of the consent orders will expire in three years.
John Stumpf, a former CEO of Wells Fargo, was barred from the banking industry in 2020 and fined $17.5 million by the Office of the Comptroller of the Currency (OCC) in order to resolve allegations that he failed to stop sales misconduct.
Since then, the management team and board of Wells Fargo have undergone significant change, introducing new incentives and risk-management practices. As the fourth CEO to lead Wells Fargo since the scandal broke, Scharf was appointed CEO in 2019.
Chopra noted that the agreement does not grant any individuals immunity, though officials declined to provide more details.
“We have made significant progress over the last three years and are a different company today,” Scharf said. “We remain committed to doing the right thing for our customers."
According to the company, Wells Fargo anticipates incurring expenses related to the CFPB penalty, customer remediation, and litigation totaling about $3.5 billion in its fourth quarter earnings. Results will be released on January 13.
The Center for Responsible Lending's (CRL) president, Mike Calhoun, praised the CFPB's "laser focus on protecting consumers" in a statement.
“Wells Fargo is a repeat offender for abusive customer practices, and it is critical that the CFPB holds the lender accountable for its illegal conduct," Calhoun said.
(Source:www.deccanherald.com)
Over 16 million customer accounts were impacted by the violations, and the consumer watchdog ordered the bank to pay a $1.7 billion civil penalty and another $2 billion to make amends.
The bank, among other things, improperly assessed fees and interest on mortgages and auto loans, had vehicles wrongfully repossessed, and tacked on surprise overdraft fees.
"Wells Fargo is a corporate recidivist that puts one-third of American households at risk of harm,” CFPB Director Rohit Chopra told journalists in a briefing. "We are concerned that the bank's product launches, growth initiatives and other efforts to increase profits have delayed needed reform."
The U.S. Federal Reserve imposed a $1.95 trillion asset cap on the bank in 2018, and Federal Reserve Chair Jerome Powell has stated that this asset cap will remain in place until the firm's issues are resolved. He continued by saying that regulators should consider whether to impose additional restrictions on the bank beyond this cap.
In the early afternoon trading, Wells Fargo shares were down about 1%.
"While we do not see today's action as having a direct read-though to the asset cap and its potential removal, we would take today's announcement as a sign of positive progress on moving toward that ultimate goal," Ken Usdin, an analyst at Jefferies, wrote in a note.
Wells Fargo noted in a statement that it has "accelerated corrective actions and remediation" since 2020 and that the settlement will address issues that have been unresolved for a number of years.
"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," Charlie Scharf, the bank's chief executive officer, said in a statement.
The most recent in a string of actions that highlight the CFPB's more aggressive stance under President Joe Biden's administration is the fine for Wells Fargo.
Dealing with corporate recidivism has become one of Biden's top priorities since he took office in early 2021. The Justice Department introduced a number of policy changes last year with the goal of better discouraging repeat offenses.
Numerous enforcement actions have been taken against Wells Fargo by the CFPB and other banking regulators, including consent decrees that bind the bank legally to address violations across all of its business lines.
Nine open consent orders have been issued against the business as a result of a sales scandal that became public in September 2016.
If Wells Fargo certifies to regulators that it has made the necessary fixes, two of the consent orders will expire in three years.
John Stumpf, a former CEO of Wells Fargo, was barred from the banking industry in 2020 and fined $17.5 million by the Office of the Comptroller of the Currency (OCC) in order to resolve allegations that he failed to stop sales misconduct.
Since then, the management team and board of Wells Fargo have undergone significant change, introducing new incentives and risk-management practices. As the fourth CEO to lead Wells Fargo since the scandal broke, Scharf was appointed CEO in 2019.
Chopra noted that the agreement does not grant any individuals immunity, though officials declined to provide more details.
“We have made significant progress over the last three years and are a different company today,” Scharf said. “We remain committed to doing the right thing for our customers."
According to the company, Wells Fargo anticipates incurring expenses related to the CFPB penalty, customer remediation, and litigation totaling about $3.5 billion in its fourth quarter earnings. Results will be released on January 13.
The Center for Responsible Lending's (CRL) president, Mike Calhoun, praised the CFPB's "laser focus on protecting consumers" in a statement.
“Wells Fargo is a repeat offender for abusive customer practices, and it is critical that the CFPB holds the lender accountable for its illegal conduct," Calhoun said.
(Source:www.deccanherald.com)
