Wells Fargo to Face Largest Fine Yet
Once again Wells Fargo is about to pay dearly for its inability to walk the straight and narrow. The Washington Post, under the byline of Renae Merle, is reporting that the bank is about to be hit with the largest penalty of the Trump administration, perhaps as early as today (April 20).
A settlement, reported to be in the neighborhood of $1 billion, has been reached between Wells and its regulators, the Consumer Financial Protection Bureau (CFPB), and the Office of the Comptroller of the Currency (OCC) over improprieties in both their mortgage and auto lending business.
The bank acknowledged last week that it faced a hefty fine. Neither regulator has commented on the matter to date.
Wells Fargo has admitted to charging some customers improper fees to lock in their mortgage interest rates and to forcing auto loan customers for auto insurance they didn't need. This drove some into defaulting on their loans and having their vehicles repossessed. In an earlier report in the Post, Merle said the insurance scheme had affected 570,000 borrowers, some 20,000 of whom had their cars seized because of this practice.
The reporter said the settlement could escalate problems at the megabank "which has been under intense federal scrutiny since admitting in 2016 that it had opened millions of sham accounts that customers didn't want."
Assuming a settlement has been reached, the enforcement action will be the first for CFPB since Mick Mulvaney became acting director of the agency last fall. His tenure has been marked by about a dozen Requests for Information from the public. These have been in response to Mulvaney's new policies at the CFPB that appear aimed at rolling back some of the aggressive enforcement and rulemaking of the agency as structured by its first director, Richard Cordray.
Carl Tobias, a professor at the University of Richmond's T.C. Williams School of Law told the Post, the anticipated fine "does send a signal that when a bank continues to have many serious problems and cannot solve them and they do serious harm to customers, Trump's CFPB and other agencies will act. One big question is whether this is a one-off, given what Trump and Mulvaney have been doing to defang the CFPB."
The settlement would be the most recent in a string of reputation damaging scandals at the bank. The most serious was the above referenced admission by the bank in 2016 that competitive pressures at the bank had led employees to open millions of bank and credit cards its customers did not request and in some cases were not aware. Some of these ended up in default. The number of customers affected continues to be re-estimated by the bank but has risen to over two million.
In addition to a hefty fine paid to regulators for this incident, the Bank was known to have reached a preliminary settlement with those unwitting borrowers for $142 million. It is facing a separate suit from customers who had their credit damaged by problems with the credit cards. Goldman Sachs estimated lowered credit scores may have cost consumers $50 million in extra interest charges.