Business

Wells Fargo to pay $3.7 billion for customer abuse


(Bloomberg) — Wells Fargo & Co. agreed to a $3.7 billion settlement with the Consumer Financial Protection Bureau to settle multiple allegations of customer abuse, including a $1.7 billion fine, the largest ever in the history of the CFPB.

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The settlement includes more than $2 billion for “consumer compensation,” the CFPB said in a statement Tuesday citing “common mismanagement” of auto loans. mortgage and deposit accounts.

“Wells Fargo’s cycle of repeated violations has harmed millions of American families,” CFPB Director Rohit Chopra said in the statement. “CFPB is asking Wells Fargo to refund billions of dollars to consumers nationwide. This is an important first step towards accountability and lasting reform of this repeat offender.”

Under CEO Charlie Scharf, Wells Fargo attempted to solve a series of scandals that began in 2016 with the revelation that the bank had opened millions of fake accounts. Problems arose in business areas, resulting in two CEOs being fired and some costly penalties, including a decision by the Federal Reserve to limit the company’s assets.

The bank set aside $2 billion in the third quarter to address a variety of legal and regulatory issues, including protecting all of its customers from harm. Scharf warned in October that the allegation “is not over.”

“We and our regulators have identified a series of unacceptable practices that we are systematically working to change,” Scharf said in the company statement. and provide remedies to customers when under warranty. “This sweeping agreement is an important milestone in our work to transform the ways we operate at Wells Fargo and leave these issues behind.”

Wells Fargo said it expects a pre-tax operating loss of about $3.5 billion in the fourth quarter, including fines and CFPB civil remedies, as well as other litigation costs.

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

Chopra has previously vowed to make big corporate penalties more painful. In 2016, the agency fined San Francisco-based Wells Fargo $100 million for opening accounts without customer permission. In 2018, the agency imposed a $1 billion penalty for additional misconduct, but granted the bank a $500 million line of credit to settle concurrently with the Office of the Comptroller of the Currency. .

Chopra, appointed by President Joe Biden, is under pressure from Democratic progressives to reinstate the consumer watchdog, which they say has withdrawn from the planning process and implemented a tougher policy under former Republican President Donald Trump.

To read the bank’s consent order, click here.

(Updated with company statement in sixth paragraph.)

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