Wells Fargo agreed to pay a $1 billion fine to federal regulators Friday over mortgage and auto-loan violations that resulted in customers paying extra fees.
The settlement, announced by the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency, found that the bank harmed customers by charging them for auto insurance tied to loans without their knowledge, and by charging certain borrowers for extensions on mortgage interest-rate locks even though the loan delays weren’t the clients’ fault.
Under the settlement, which is the largest ever imposed by the consumer bureau, Wells Fargo will reimburse harmed consumers and make improvements to its risk management and compliance.
“We have said all along that we will enforce the law,” Mick Mulvaney, the CFPB’s acting director, said in a statement.
The $1 billion fine is the latest setback for Wells Fargo, as it struggles to regain customer trust after its fake-accounts scandal. Last year, it acknowledged that it created about 3.5 million bank and credit card accounts that were not authorized by customers and paid $185 million in penalties.
In the consent order released Friday, the CFPB said Wells Fargo “inappropriately” charged borrowers extra fees for interest rate-lock extensions even though the delays were caused by the bank, rather than the clients. The bank’s own internal audit, the CFPB noted, “determined that its Extension Fees policy was not consistently applied,” which resulted in the bank’s customers paying extra fees “that should have been absorbed by the (bank) under its policy.”
In October, the bank said it would give refunds to customers who paid the fees between September 16, 2013, and February 28, 2017.
The bank announced in July that it would give refunds to more than 570,000 auto loan customers that paid for for the unnecessary coverage.
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.”
Due to the sizable penalty, the bank said it would adjust its first-quarter 2018 earnings results to reflect a $800 million reduction in its net income from previously reported figures.
Wells Fargo shares were up more than 2% Friday.
During a conference call last week with investors and Wall Street analysts, Sloan outlined the bank’s effort to restore investor confidence and improve customer services. He said the bank had made progress but faces challenges ahead.
Brian Kleinhanzl, a banking analyst at KBW, said it is still not clear if all of Wells Fargo’s legal issues are behind them.
“The settlement removes one overhang, but there are still overhangs on when business momentum will return to the company and whether or not additional wrongdoing will be found,” he noted in a report.
In a release, the Office of the Comptroller of the Currency, said: “The OCC took these actions given the severity of the deficiencies and violations of law, the financial harm to consumers, and the bank’s failure to correct the deficiencies and violations in a timely manner.”
Source: Adam Shell, USA TODAY
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