Federal regulators on Friday hit banking giant Wells Fargo with a $1 billion fine for violations involving home mortgages and auto insurance.
The joint action by the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC), is the largest fine levied against a bank during the Trump administration, which has repeatedly vowed to rollback regulations on the industry.
“I am especially pleased that we were able to work closely and effectively with our colleagues at the OCC, and I appreciate the key role they played in the negotiations,” said Mick Mulvaney, acting director of the CFPB, in a statement issued Friday. “As to the terms of the settlement: we have said all along that we will enforce the law. That is what we did here.”
A number of former Wells Fargo employees reported that the bank was charging customers a fee for failing to meet deadlines to lock-in mortgage rates. However, it was the bank that missed the deadline due to a delay in paperwork, a report from ProPublica found last January.
According to Wells Fargo’s third-quarter filings with the U.S. Securities and Exchange Commission in November 2017, the company announced plans to reach out to all home lending customers that paid fees for those mortgage rate lock extensions over a four-year period. It said it would refund customers who believe they should not have paid those fees. A total of approximately $98 million in fees were charged to about 110,000 borrowers, although the company says a substantial number were appropriately charged.
“The plan to issue refunds follows an internal review that determined that a rate lock extension policy implemented in September 2013 was, at times, not consistently applied, resulting in some borrowers being charged fees in cases where the Company was primarily responsible for the delays that made the extensions necessary,” the filing report says.
The company also apologized in July 2017 for allegedly charging as many as 570,000 customers for auto insurance they didn’t need, which resulted in as many as 20,000 customers defaulting on their car loan, according to CNN.
Wells Fargo said the fine would trim approximately $800,000 of first-quarter profits, to $4.7 billion. The consent order will also require Wells Fargo to submit plans for strengthening its compliance and risk management, as well as its approach to customer remediation efforts.
“For more than a year and a half, we have made progress on strengthening operational processes, internal controls, compliance and oversight, and delivering on our promise to review all of our practices and make things right for our customers,” said Timothy J. Sloan, president and chief executive officer of Wells Fargo in a statement. “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 with focus, accountability, and transparency. Our customers deserve only the best from Wells Fargo, and we are committed to delivering that.”
Friday’s announcement is the latest in a series of scandals for Wells Fargo, which began when it was revealed that employees at the bank had opened nearly 3.5 million unauthorized accounts for unknowing customers. The result of that scandal led to the firing of thousands of employees, the resignation of CEO John G. Stumpf and a $142 million class action settlement.
In a letter to Wells Fargo customers yesterday, the bank announced it was extending the deadline to submit claims related to the lawsuit, to July 7.
“If you believe Wells Fargo opened a checking, savings, credit card, or line of credit account for you without your permission, or if you purchased identity theft protection from us, you may be entitled to compensation from this fund,” the letter reads. “If you submit a claim, you may be eligible for reimbursement of fees, compensation for potential impact on your credit, and an additional cash payment based on any money remaining in the fund after benefits and costs are paid out.”
In 2016, CFPB levied a $100 million fine as part of an overall $185 million penalty for the fake account scandal — the largest single fine in the agency’s history since it was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. The $1 billion fine dwarfs that previous high.
Mulvaney previously supported a bill that would have eliminated the department entirely when he was in Congress, calling the CFPB “a sick, sad joke.” Trump himself, however, took to Twitter in December and vowed severe penalties for Wells Fargo.
Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!
— Donald J. Trump (@realDonaldTrump) December 8, 2017
This isn’t the first time Wells Fargo set a record for largest fine ever levied by a government agency. In April 2016, the bank was forced to pay $1.2 billion after an investigation from the U.S. Justice Department revealed the bank had falsely claimed certain mortgage loans were eligible for Federal Housing Administration insurance over a seven year period from 2001-08. The action resulted in the government paying out insurance claims when some of those loans defaulted.
Wells Fargo, was also dinged to the tune of $108 million after settling with the Department of Veterans’ Affairs over claims it charged veterans hidden fees to refinance their mortgages, according to Reuters. The issue came to light after a 2006 lawsuit and the bank settled in 2017.