Wells Fargo Hit With Major Fine

On April 19, Wells Fargo was ordered to pay $1 billion to settle complaints relating to borrowers who took out auto loans and home mortgages. This settlement comes two years later after Wells Fargo was in the headlines for opening millions of fake accounts behind customers’ backs. The latest blow to Wells Fargo comes as the banking giant has been under scrutiny from a string of self-inflicted crises. The penalty was the largest fine in the history of both the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau; both agencies reached separate consent orders with the bank.

What Did Wells Fargo Do?

Federal regulators singled out Wells Fargo’s conduct in two areas of its business:

  • Mortgages: Wells Fargo account holders were forced to pay for extending the length of interest rates on mortgage applications even when the bank was responsible for delays in the application process.
  • Auto Loan Insurance: Thousands of customers who bought cars with loans from Wells Fargo were forced to buy unnecessary insurance policies from the bank with premiums that topped $1,000 per year. These policies could have contributed to about 27,000 customers having their cars repossessed after defaulting on their loans.
  • In a statement, Wells Fargo CEO Tim Sloan said, “While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them.”

    What Will the Bank do Going Forward?

    The New York Times reports that Wells Fargo agreed to submit plans to regulators detailing how it plans to strengthen its compliance and risk-management programs and “remediation efforts” for customers. The CFPB said at least 50,000 customers would probably require remediation and that the total to be repaid would exceed $10 million. Wells Fargo said the settlement would result in an $800 million reduction of its reported Q1 profits of $5.9 billion.

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