WASHINGTON, D.C.–Wells Fargo Bank must pay $1 billion to federal regulators over two counts of corporate malfeasance against its mortgage and auto lending business.
The fine represents the largest imposed by the Consumer Financial Protection Bureau (CFPB) and most severe levied by the administration of President Donald Trump.
The giant bank must pay $500 million to the Office of the Comptroller of the Currency (OCC) and a bottom line $500 million the CFPB over the bank’s taking advantage of customers and wringing out every dollar possible from them.
In the fall of 2016, Wells Fargo began admitting to a slew of abusive practices used to cheat consumers out of millions of dollars as part of its day-to-day business model.
On April 21, the CFPB and the OCC hit the bank with the violations as consequences for overcharging customers, via fees, when they opted to lock in a given interest rate on their pending mortgage loans and for automatically signing up auto loan patrons for unnecessary insurance policies.
More than 20,000 customers who didn’t have the funds to pay for the extra insurance payments fell behind in their payments and the bank subsequently repossessed their cars, the bank admitted earlier.
Separately, as we reported, a widespread sales practices scandal in which those employed by the bank, opened about 3.5 million bank or credit card accounts without customer approval of any kind, tarnished Wells Fargo’s reputation.
After paying a total of $187 million in fines and penalties to government regulators including the CFPB, and Los Angeles City Attorney’s office – John Stumpf, the CEO at the time, resigned amid widespread scrutiny and criticism.
According to a consent order, the CFPB found that Wells Fargo violated the Consumer Financial Protection Act (CFPA) in the method it used to administer a mandatory insurance program related to its auto loans.
“The Bureau also found that Wells Fargo violated the CFPA in how it charged certain borrowers for mortgage interest rate-lock extensions,” stated CFPB. “Under the terms of the consent orders, Wells Fargo will remediate harmed consumers and undertake certain activities related to its risk management and compliance management.”
The case also represents a significant collaboration between the two regulatory agencies that will split the billion-dollar fine.
“I am especially pleased that we were able to work closely and effectively with our colleagues at the OCC, and I appreciate the key role they played in the negotiations,” said CFPB’s Acting Director Mick Mulvaney in a statement.
“We had concurrent jurisdiction over this with the OCC and decided in the last several months to actually work together with them on an enforcement action, something that has been legal for a long time, hasn’t been done for a long time, at least not at this level,” Mulvaney said on American Public Media’s “Marketplace,” a daily radio show hosted by Kai Ryssdal.
“We had some jurisdiction over some of the claims the OCC had some over others, we just decided to do it together.”
Ryssdal questioned Mulvaney about his track record running the consumer watchdog agency, saying, “The CFPB under Mick Mulvaney, in your own words, has not been extremely active.”
“That’s actually not true,” responded Mulvaney. “All I said was I wasn’t going to push the envelope we weren’t going to try to be overly creative and go after folks who might not be breaking the law. I think anyone who would look at the facts including those that were admitted by Wells, can tell you that they broke the law.”
Dave is an award-winning business reporter who has authored over 200 articles for New Brunswick Today.