Wells Fargo to pay US$3.7 billion in restitution, penalties

U.S. banking giant Wells Fargo & Co. is paying US$3.7 billion in customer restitution and penalties to resolve allegations of misconduct in its auto lending, mortgage and deposit businesses.

In a settlement, the U.S. Consumer Financial Protection Bureau (CFPB) ordered the bank to pay more than US$2 billion in restitution to consumers and a US$1.7 billion civil penalty for an array of violations that included misapplied loan payments — which resulted in wrongfully foreclosed homes and illegally repossessed vehicles — and incorrectly charged fees and interest that affected millions of consumers.

The CFPB found that systematic failures in the bank’s auto loan servicing business caused US$1.3 billion in harm across more than 11 million accounts, including incorrectly applied payments and improperly charged fees and interest that resulted in vehicles being wrongfully repossessed.

It also alleged that the bank improperly denied mortgage modifications, illegally charged surprise overdraft fees, and improperly froze consumer accounts and mispresented fee waivers.

The agency ordered more than US$1.3 billion in consumer redress for affected auto lending accounts; more than US$500 million in redress for affected deposit accounts, including US$205 million for illegal surprise overdraft fees; and nearly US$200 million for affected mortgage servicing accounts.

“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said CFPB director Rohit Chopra in a release.

In a statement, the bank said it is “pleased to bring closure to these issues,” and that it has “made significant progress in strengthening its risk and control infrastructure” over the past few years.

“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,” said Charlie Scharf, CEO at Wells Fargo, in the statement.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.