Wells Fargo to pay $3.7bn fine for ‘widespread mismanagement’

WASHINGTON: The US Consumer Financial Protection Bureau hit Wells Fargo & Co with the watchdog’s largest ever civil penalty on Tuesday as part of a $3.7 billion agreement to settle charges over widespread mismanagement of car loans, mortgages and bank accounts.

The consumer watchdog ordered the bank to pay a $1.7 billion civil penalty, and another $2 billion to redress more than 16 million consumer accounts affected by the violations, the regulator said in a statement.

The bank illegally charged fees and interest on auto loans and mortgages, had cars wrongly repossessed and imposed unlawful surprise overdraft fees, among other issues, the CFPB said.

“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.

He added that regulators should consider whether to apply additional limitations on the bank beyond the $1.95 trillion asset cap the Federal Reserve imposed in 2018, which Federal Reserve Chair Jerome Powell has said will remain in place until the firm’s problems are fixed.

Shares of Wells Fargo were down about 1% in late morning trading.

“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 said the settlement will resolve issues that have been outstanding for several years, and noted in a statement it has “accelerated corrective actions and remediation” since 2020.

“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 fine for Wells Fargo is the latest in a series of actions that underscore the CFPB’s more aggressive posture under President Joe Biden’s administration.

Tackling corporate recidivism has emerged as a key priority under Biden, who entered the White House in early 2021. Last year, the Justice Department rolled out a series of policy changes aimed at better deterring repeat misconduct.