Wells Fargo hit with $1 billion fine

Two federal regulators levied $1 billion in penalties against Wells Fargo on Friday after an investigation determined the bank forced some 2 million auto loan borrowers to purchase vehicle insurance as a condition to getting the loans.

A fine had been expected from the Office of the Comptroller of the Currency as well as the Consumer Financial Protection Bureau for violations of the Dodd-Frank Wall Street Reform and Consumer Protection and Federal Trade Commission acts. In addition to the penalty, Wells Fargo pledged to provide remediation to any customers who were harmed under its policies, and to improve its legal compliance.

The OCC issued a ceaseand-desist order that described Wells Fargo as engaging in “reckless” and “unsafe” practices since 2011, a period that covers the tenures of both former CEO John Stumpf and Tim Sloan, who replaced Stumpf in October 2016 after Wells Fargo admitted employees opened bogus accounts in the names of customers to earn extra commissions.

“When we think about rebuilding trust, first and foremost our most important asset in this company is our people, and so we have made fundamental changes in how folks are compensated,” Sloan said on April 13. “We certainly had a thorough look in every nook and cranny in the company and we are continuing on that process. ... We should have been doing a better job of that when we were performing quite well in the prior years, and we are not going to make that mistake again.

The OCC and CFPB investigation spanned multiple fronts, including Wells Fargo’s practice of forcing auto loan borrowers to purchase “collateral protection” insurance as a condition of their loan contracts, and continuing to maintain the coverage in many instances in which customers showed evidence of obtaining insurance through another channel. The investigation determined many of those policies cost at least $1,000 on an annual basis, and in instances in which Wells Fargo did refund money to customers who provided evidence of coverage, it did not cover

extra costs like interest and fees.

The agencies determined as well that Wells Fargo improperly foisted off fees to mortgage borrowers in cases in which it failed to issue a mortgage loan within a window that locked in rates, with those extra fees the responsibility of the bank.

The federal agencies did not provide a state-by-state breakdown of the numbers of Wells Fargo borrowers affected by the actions covered in the settlement.