17 November 2018

Wells Fargo Pays $1 Billion To Settle Management Claims

#
Share This Story

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 auto-lending businesses.

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 its rebuke.

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 sales-practices scandal.

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.

Click here for the original article from The Wall Street Journal.

Join Our Online Community
Join the Better Way To Retire community and get access to applications, relevant research, groups and blogs. Let us help you Retire Better™
FamilyWealth Social News
Follow Us