Bank to pay $3.7B more for consumer violations

Record-breaking fine comes on top of operating restrictions

Wells Fargo’s yearslong mistreatment of its customers has resulted in another record-breaking fine and a warning that more restrictions on its ability to do business could soon follow.

On Tuesday, the bank agreed to pay a $1.7 billion fine and another $2 billion in damages to settle claims that it engaged in an array of banking violations over the last decade that harmed millions of consumers, the Consumer Financial Protection Bureau said.

The bank misapplied customer payments on home and auto loans, wrongfully repossessed some borrowers’ cars and homes, and charged overdraft fees even when customers had enough money to cover purchases they made with their bank cards, according to an order filed by the consumer protection bureau. Wells Fargo stopped the conduct this year as part of a larger effort to clean up other abusive practices stretching back to 2011, the filing said.

The fine is the largest ever imposed by the regulator, breaking a previous record of $1 billion, also set by an action against Wells Fargo.

The settlement allows the bank to address one of a series of a crises that led to the ouster of its previous CEO, Timothy Sloan, in 2019. Sloan took the top post to help clean up the bank’s reputation, which was reeling from self-inflicted scandals, but he became a lightning rod for criticism and was replaced after three years on the job by Charles W. Scharf.

But the bank must still contend with other regulatory challenges, including a consent order imposed by the Federal Reserve in 2018 that restricted its growth until it fixed its many problems and limits on its mortgage servicing abilities levied in 2021 by the Office of the Comptroller of the Currency for similar reasons.

The consumer protection bureau’s director, Rohit Chopra, told reporters Tuesday that the action against the bank “should not be read as a sign that Wells Fargo has moved past its long-standing problems or that the CFPB’s work here is done.”

As part of its settlement with the regulator, Wells Fargo has also been repaying customers, returning improperly charged fees and offering some financial relief to those whose finances and credit ratings were hurt by the bank’s practices.

The damages include returning overpayments on home and auto loans; restoring the value that customers lost when the bank took away their cars and foreclosed on their homes; and returning money it improperly kept after offering auto loan customers “Guaranteed Asset Protection” insurance, which would cover the difference between their outstanding loans and their vehicles’ value if totaled or repossessed.