Wells Fargo ordered to pay $3.7 billion for alleged mismanagement of auto, mortgages and deposit accounts

Wells Fargo ordered to pay $3.7 billion for alleged mismanagement of auto, mortgages and deposit accounts

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The Consumer Financial Protection Board (CFPB) on Tuesday said it is requiring Wells Fargo & Co. to pay $3.7 billion for alleged widespread mismanagement of auto loans, mortgages and deposit accounts.

The CFPB said Wells Fargo “repeatedly misapplied loan payments, wrongfully foreclosed on homes and illegally repossessed vehicles, incorrectly assessed fees and interest, charged surprise overdraft fees, along with other illegal activity affecting over 16 million consumer accounts.”

Wells Fargo

has been ordered to pay more than $2 billion in redress to consumers in addition to a $1.7 billion civil penalty for legal violations.

“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 CFBP said.

Shares of Wells Fargo rose 1.2% on Tuesday.

Wells Fargo did not admit wrongdoing as part of the settlement.

In a statement, the bank said the settlement will result in the CFPB terminating a 2016 consent order.

The settlement will also provide clarity and a path forward for termination of a 2018 consent order and that the CFPB “recognizes recent acceleration of efforts,” the bank said.

“The CFPB recognized that since 2020, the company has accelerated corrective actions and remediation, including to address the matters covered by today’s settlement,” the bank said in a statement.

Wells Fargo CEO Charlie Scharf said the settlement marks an “important milestone in our work to transform the operating practices of Wells Fargo and to put these issues behind us.”

Wells Fargo warned it will book an operating losses expense of $3.5 billion, or $2.8 billion, net of tax, in the fourth quarter when it reports results on Jan. 13.

“Wells Fargo has made significant progress in strengthening its risk and control infrastructure over the past several years,” the bank said.

Scharf has been CEO of Wells Fargo since late 2019 and has been focusing on bringing the megabank into regulatory compliance.

While an asset cap remains in place over Wells Fargo since 2018, as punishment for its phony-accounts scandal, other regulatory matters are now in the rear-view mirror:

In December 2021, the Office of the Comptroller of the Currency (OCC) terminated a consent order issued in 2015 regarding add-on products that the bank sold to retail banking customers.

Also, a CFPB consent order issued in 2016 on the bank’s retail practices expired in 2021, and a 2015 consent order from OCC over Wells Fargo’s bank secrecy and anti-money laundering compliance was terminated in January 2021.

Finally, a CFPB consent order issued in 2015 regarding claims that the bank violated the Real Estate Settlement Procedures Act expired in January 2020.

Also Read: Fed banking supervisor eyes ‘holistic’ review of bank regulations while doubling down on protections they offer

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