By TOM JOYCE
THE CENTER SQUARE CONTRIBUTOR
(The Center Square) — A San Francisco-based financial services company now owes the federal government billions of dollars.
Wells Fargo agreed to a $3.7 billion settlement with the federal Consumer Financial Protection Bureau due to legal violations of rules concerning checking accounts, mortgages and auto loans.
The bureau ordered the company to pay a $1.7 billion civil penalty and repay more than $2 billion combined to more than 16 million customers, the CFPB said in a news release.
“The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes,” the agency said in the release. “Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank.”
The CFPB says that Wells Fargo has harmed millions of consumers over the past several years.
In detail, the bureau contends Wells Fargo:
— Unlawfully repossessed vehicles and bungled handling of auto loans that resulted in $1.3 billion in harm across more than 11 million accounts. The bank incorrectly applied borrowers’ payments, improperly charged fees and interest, and wrongfully repossessed borrowers’ vehicles, according to the consumer bureau.
In addition, the bureau said the bank failed to ensure that borrowers received a refund for certain fees on add-on products when a loan ended early.
— Improperly denied mortgage modifications: During at least a seven-year period, the bank improperly denied thousands of mortgage loan modifications, which in some cases led to Wells Fargo customers losing their homes to wrongful foreclosures, according to the bureau. The bank was aware of the problem for years before it ultimately addressed the issue.
— Illegally charged surprise overdraft fees: For years, the bureau said, Wells Fargo unfairly charged surprise overdraft fees — fees charged even though consumers had enough money in their account to cover the transaction at the time the bank authorized it — on debit card transactions and ATM withdrawals. As early as 2015, the CFPB, as well as other federal regulators, including the Federal Reserve, began cautioning financial institutions against this practice, known as “authorized positive fees.”
— Unlawfully froze consumer accounts and misrepresented fee waivers. The bureau said the bank froze more than 1 million consumer accounts based on a faulty automated filter’s determination that there may have been a fraudulent deposit, even when it could have taken other actions that would have not harmed customers. Customers affected by these account freezes were unable to access any of their money in accounts at the bank for an average of at least two weeks. The bank also made deceptive claims as to the availability of waivers for a monthly service fee.
Wells Fargo has violated consumer finance law in the past, according to the CFPB. It says some of those previous illegal practices included, “faulty student loan servicing, mortgage kickbacks, fake accounts and harmful auto loan practices.”
Of the more than $2 billion that Wells Fargo will spend to redress its consumers, more than $1.3 billion will go to those with auto lending accounts. More than $500 million will go to those with affected deposit accounts, and nearly $200 million will go to those with affected mortgage servicing accounts.
Wells Fargo said in a separate news release that it will comply with the CFPB’s demands, even though it will result in the company losing money in the final quarter of 2022.
“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,” Wells Fargo CEO Charlie Scharf said in the release. “Our top priority is to continue to build a risk and control infrastructure that reflects the size and complexity of Wells Fargo and run the company in a more controlled, disciplined way.”
