Wells Fargo agreed
to pay $1 billion to settle federal claims of misconduct in its auto and
mortgage lending businesses.
The settlement with the Consumer Financial Protection Bureau and Office
of the Comptroller of the Currency concerned the bank’s failures to catch and
prevent problems, including improper charges to consumers in its mortgage and
The fine is the largest against a bank so far in the Trump
administration and a signal that while officials are working to ease postcrisis
regulatory rules they won’t let companies off the hook for misconduct.
“We have said all along that we will enforce the law. That is what we
did here,” CFPB acting director Mick Mulvaney said in a statement.
As part of the settlement, the bank also agreed to offer restitution to
customers and improve risk and compliance management practices.
“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,” the OCC said in
its release detailing the settlement.
The regulator added that it “found deficiencies in the bank’s
enterprisewide compliance risk management program that constituted reckless,
unsafe or unsound practices.”
The settlement covers the bank’s practices in two main areas: charging
improper fees for rate-lock extensions in mortgage lending and selling unwanted
insurance products to auto-loan customers.
“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 as we deliver our commitments,” said Timothy J. Sloan, president and chief
executive officer of Wells Fargo.
The settlement is the latest in a series of regulatory woes for the San
Francisco-based bank. It has faced a number of regulatory problems in recent
years, including regulatory scrutiny of illegal sales practices that involved
the opening of as many as 3.5 million accounts without customers’ consent.
Regulators have since probed the bank’s practices in auto lending, mortgages,
wealth and investment management and foreign exchange.
Wells Fargo restated its first-quarter earnings, lowering its net income
to $4.7 billion, or 96 cents a diluted share, a reduction of $800 million, or
16 cents a diluted share, from previously reported figures.
Wells Fargo disclosed last week that the regulators had
offered to resolve civil investigations for $1 billion.
Friday’s announcement is one of several recent regulatory actions
against the bank. In February, the Federal Reserve took an unprecedented
enforcement action that barred the bank from growing past the $1.95 trillion in
assets it had at the end of 2017. The Fed cited “widespread consumer abuses” in
In 2016, the regulators levied a $185 million fine after finding the San
Francisco-based bank had opened as many as 3.5 million accounts without
customers’ knowledge or consent.
Banking regulators in mid-2017 downgraded one part of a
secret assessment of Wells Fargo’s health and strength related to its risk
management, The Wall Street Journal reported in January.
The assessment—known as a CAMELS score—ranks a firm on measures
including capital, management and liquidity. The scores can affect the level of
insurance payments a bank must make as well as the level of regulatory
oversight of a firm.
Wells Fargo and the OCC have negotiated for months over how the firm
assesses risks and over a potential settlement, the Journal has reported. The
OCC also sent the bank’s board a letter in November about these issues.
The company in recent months hired a consultant to try to revamp its
procedures and revisited structural changes made in response to the
The bank also said its chief risk officer Mike Loughlin would retire and
that it will hire someone to replace him in the next few months. The bank
hasn’t named a replacement but has been interviewing outside candidates, people
familiar with the process said.
In late January, Wells Fargo appointed former Federal Reserve Bank of
New York official Sarah Dahlgren to oversee regulatory relations for its
corporate risk group.
The Journal reported in March that four top risk management executives
would be retiring from Wells Fargo in the coming weeks.
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