Once a juggernaut with a seemingly unassailable spot atop the mortgage lending industry, troubled megabank Wells Fargo agreed today to pay $3.7 billion to the Consumer Financial Protection Bureau (CFPB) as a penalty for widespread fraud and misconduct over several years.
The settlement, which is meant to redress harm caused to 16 million Wells Fargo customers, comes following reports that the company is planning to scale back its mortgage segment in the long term, and is only the most recent in a long series of scandals and missteps by the storied lender.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said CFPB Director Rohit Chopra in a statement. “The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”
As part of the settlement, the bank is also agreeing to stop charging so-called “surprise overdraft fees” and refund certain fees charged to auto loan holders. Part of the settlement ($1.7 billion) is a penalty, and will go into the CFPB’s victims relief fund, while the rest will be used to redress customers affected by the bank’s violations.
In an email to RISMedia, a Wells Fargo spokesperson said that “much” of the $2 billion in customer remediation is already complete.
Among other illegal activities cited by the CFPB is Wells Fargo’s improper denial of mortgage modifications over a seven year period, which resulted in foreclosures for many. Another “systemic failure” affected 11 million people who had auto loans serviced by the bank, resulting in wrongfully repossessed vehicles.
In a statement posted to the company’s website, Wells Fargo CEO Charlie Scharf, who was brought in to right the ship in 2019, called the settlement “an important milestone in our work to transform the operating practices at Wells Fargo.”
“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,” Scharf said.
For close to decade, the bank that used to hold one-third of all home loans in the country has been wracked by mismanagement and caught engaging in widespread illegal conduct. In 2015, Wells Fargo paid $35.7 million in a mortgage kickback scheme, while in 2018, it was hit with a $1 billion fine for other violations in its auto and home loan segments. In 2020, the bank forked over $3 billion to resolve criminal and civil investigations into a widespread practice of opening accounts under people’s names without their knowledge or consent.
More recently, Wells Fargo has been accused by both consumers and the federal government of racist practices, including conducting fake interviews with minority and female candidates.
