The largest-ever civil fine levied by the U.S. Consumer Financial Protection Bureau was levied against American financial behemoth Wells Fargo & Co. (WFC.N) on Tuesday as part of a $3.7 billion settlement to resolve allegations of widespread mismanagement of bank accounts, mortgages, and auto loans.
Wells Fargo directed by US Consumer Financial Protection Bureau to pay $3.7 billion for Consumer Law Violation
Over 16 million client accounts were impacted by the irregularities, and the consumer watchdog ordered the bank to pay a $1.7 billion civil penalty and another $2 billion to make amends.
Wells Fargo had improperly assessed fees and interest on mortgages and auto loans, had vehicles wrongfully repossessed, incorrectly applied overdraft fees against savings and checking accounts
According to CFPB Director Rohit Chopra, “Wells Fargo is a corporate recidivist that puts one-third of American households at risk of harm.” “We are worried that the bank’s product introductions, growth strategies, and other profit-boosting measures have postponed necessary reform.”
The U.S. Federal Reserve imposed a $1.95 trillion asset cap on the bank in 2018, and Federal Reserve Chair Jerome Powell has stated that this asset cap will remain in place until the firm’s issues are resolved. He continued by saying that regulators should consider whether to impose additional restrictions on the bank beyond this cap.
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In the early afternoon trading, Wells Fargo shares were down roughly 1%.
While we do not believe that today’s decision would directly affect the asset cap and its probable removal, Ken Usdin, an analyst at Jefferies, stated in a note that we should view today’s announcement as a step in the right direction.
Wells Fargo said in a statement that it has “increased corrective actions and remedies” since 2020 and that the settlement will address issues that have been unresolved over a number of years.
The bank’s CEO, Charlie Scharf, said in a statement that “this comprehensive agreement is a major milestone in our work to improve the operational processes at Wells Fargo and to put these concerns behind us.”
Scharf further said that running the business in a more controlled, disciplined manner and continuing to establish a risk and control architecture that reflects the size and complexity of Wells Fargo are the top priorities.
Since 2016, when customers opened millions bank accounts in businesses illegally, Wells Fargo has been penalised numerous times by US regulators for violating consumer protection rules.
The highest fine against a bank at the time for widespread consumer law violations was paid by Wells Fargo in 2018: $1 billion.
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