Wells Fargo to pay $3.7 billion for mistreating customers

Wells Fargo to pay $3.7 billion for mistreating customers
The bank's settlement with the Consumer Financial Protection Bureau deals with a variety of allegations and includes a $1.7 billion fine that's the biggest in CFPB history.
DEC 20, 2022
By  Bloomberg

Wells Fargo & Co. agreed to a $3.7 billion settlement with the Consumer Financial Protection Bureau to settle a variety of allegations of mistreating customers, including a $1.7 billion fine that’s the biggest in CFPB history. 

The agreement includes more than $2 billion in “redress to consumers,” the CFPB said in a statement Tuesday that cited “widespread mismanagement” of auto loans, mortgages and deposit accounts.

“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” CFPB Director Rohit Chopra said in the statement. “The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”

Under Chief Executive Charlie Scharf, Wells Fargo has been trying to resolve a raft of scandals that began in 2016 with the revelation that the bank opened millions of bogus accounts. Problems surfaced across business lines, resulting in the ousters of two CEOs and a number of costly penalties, including the Federal Reserve’s decision to cap the firm’s assets. 

The bank set aside $2 billion in the third quarter to cover a variety of regulatory and legal issues, including making harmed customers whole. Scharf warned in October that the charge “isn’t the end of it.” 

“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,” Scharf said in the company’s statement. “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 said it expects a pretax operating loss of about $3.5 billion in the fourth quarter, which includes the CFPB civil penalty and remediation, as well as other litigation expenses.

Shares of the company fell 2.7% to $40.70 at 9:16 a.m. in early New York trading.

Chopra has previously vowed to make punishments of large firms more painful. In 2016, the agency fined San Francisco-based Wells Fargo $100 million for opening accounts without customers’ permission. In 2018, the agency imposed a $1 billion sanction for additional misconduct, but gave the bank a $500 million credit for a concurrent settlement with the Office of the Comptroller of the Currency.

Chopra, appointed by President Joe Biden, is under pressure from progressives in the Democratic party to reinvigorate the consumer watchdog, which they say pulled back from tougher policy making and enforcement under former Republican President Donald Trump.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.