The bank illegally charged fees and interest on auto loans and mortgages of its consumers, wrongly repossessed their cars, and misapplied their loan payments, in addition to charging unlawful surprise overdraft fees
Wells Fargo Bank branch located in the Wells Fargo Centre. (Credit: Wells Fargo)
Wells Fargo has reached a $3.7bn settlement with the US Consumer Financial Protection Bureau (CFPB) to resolve multiple claims of illegal conduct in the past several years.
CFPB said that the bank illegally charged fees and interest on auto loans and mortgages of its consumers, wrongly repossessed their cars and misapplied their loan payments.
In addition, Wells Fargo charged unlawful surprise overdraft fees and applied other incorrect charges to the checking and savings accounts of the consumers.
The US consumer watchdog ordered the bank to pay $1.7bn in civil penalty and more than $2bn to redress more than 16 million customers affected by the bank’s misconduct.
The penalty amount will be added to the CFPB’s Civil Penalty Fund, which will be used to provide relief to victims of consumer financial law violations.
CFPB director Rohit Chopra said: “Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families.
“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.”
Wells Fargo said that the settlement will resolve claims related to automobile lending, consumer deposit accounts, and mortgage lending, outstanding for several years.
The CFPB recognised that the company has advanced its corrective actions and remediation since 2020, including matters covered under the current settlement.
Wells Fargo claimed that the corrective actions related to many of the misconducts described in the current settlement are substantially completed.
As part of the settlement, the bank has signed a consent order with the US watchdog, which will be terminated after it completes the remaining required actions.
Furthermore, Wells Fargo expects an operating losses expense of about $3.5bn, included in its noninterest expense for the three months ending on 31 December 2022.
Wells Fargo chief executive officer Charlie Scharf said: “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.
“This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us.
“We have made significant progress over the last three years and are a different company today. We remain committed to doing the right thing for our customers and working closely with our regulators and others to deal appropriately with any issue that arises.”
Earlier this year, the Securities and Exchange Commission (SEC) charged Wells Fargo Advisors for failing to file at least 34 Suspicious Activity Reports (SARs) in a timely manner.