The Consumer Financial Protection Bureau said Tuesday that Wells Fargo & Co. had harmed millions of people through wrongful car repossessions, improper denials of mortgage-loan modifications, and surprise overdraft fees that were lobbed at consumers who had enough funds at the time of their transactions.
Thousands of customers lost their cars and homes due to the alleged mistreatment, the consumer watchdog agency said in its new findings. Now the CFPB is ordering that Wells Fargo
pay $3.7 billion — including more than $2 billion in direct redress to affected consumers and a record fine of $1.7 billion — as a result of the alleged conduct.
Related: Wells Fargo ordered to pay $3.7 billion for alleged mismanagement of auto loans, mortgages and deposit accounts
“While today’s order addresses a number of consumer abuses, it should not be read as a sign that Wells Fargo has moved past its longstanding problems or that the CFPB’s work here is done,” CFPB director Rohit Chopra said in remarks Tuesday, noting the bank has been repeatedly penalized for wrongdoing in the past several years. “Importantly, the order does not provide immunity for any individuals, nor, for example, does it release claims for any ongoing illegal acts or practices.”
Wells Fargo said in a statement Tuesday that it had already substantially completed “required actions related to many of the matters described in the settlement,” though, and a consent order with the bank unveiled Tuesday noted that $1.3 billion had been paid in remediation to some 11 million borrower accounts to address auto-loan issues.
The bank did not admit to any wrongdoing as part of the consent order. Wells Fargo said in its statement that the CFPB was terminating a 2016 consent order and would “provide clarity and a path forward for termination” of a 2018 order.
“As we have said before, 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. 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 CEO Charlie Scharf said. “Our top priority is to continue to build a risk and control infrastructure that reflects the size and complexity of Wells Fargo and run the company in a more controlled, disciplined way.”
The CFPB’s consent order outlined several allegations against the bank, including that:
- Wells Fargo incorrectly applied or processed “many” car-loan borrowers’ payments from at least 2011 through 2022, the CFPB said, “due to various technology, training, customer service, and compliance failures when servicing auto loans.” One of the alleged failures: Wells Fargo branch employees failed to notify borrowers that payments meant to be applied to their loan principal did not cover past-due amounts, the agency said — allegedly because the bank “did not make the information accessible to branch employees, resulting in nearly 210,000 borrower accounts for which payments were applied in a manner that was less beneficial to the borrower than they could have been.”
- Wells Fargo allegedly repossessed borrowers’ cars despite those borrowers making payments or entering into agreements to stall repossessions, among “other repossession-related errors,” including “failing to provide legally required information to certain borrowers.”
- The bank allegedly experienced a “significant technology and internal controls failure” that affected its process for evaluating mortgage-loan modification applications from 2011 through April 2018. Thanks to calculation formula errors that resulted in overstated attorneys’ fees, qualified borrowers sometimes lost out on loan modifications. The CFPB said in a statement that the bank was aware of the problem “for years” before moving to fix it. “Ultimately, [Wells Fargo] addressed the error and is providing approximately $77.2 million in remediation to approximately 3,200 mortgage accounts that experienced incorrect loss-mitigation outcomes, including wrongful foreclosures,” the agency said in the consent order.
- Wells Fargo was accused of charging surprise overdraft fees on customers who had no way of reasonably avoiding them, since they had available funds at the time of the transaction or withdrawal. The bank will now stop those fees.
Steve Gelsi contributed to this story.