CFPB orders Wells Fargo to pay $3.7 billion amid widespread consumer banking problems

The Consumer Financial Protection Bureau is ordering Wells Fargo to pay $3.7 billion for violating consumer protection laws — a major penalty that also clears some of the megabank’s long-standing legal troubles.

The order covers “widespread mismanagement” of auto loans, mortgages and deposit accounts, with the agency saying the $1.9 trillion-asset bank wrongfully foreclosed on homes, illegally repossessed vehicles and charged customers surprise fees. 

“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” CFPB Director Rohit Chopra said in a news release Tuesday, calling the action an “initial step for accountability and long-term reform of this repeat offender.”

Wells Fargo is required to pay a $1.7 billion penalty to the Consumer Financial Protection Bureau, plus more than $2 billion to harmed consumers, though the bank says it has already completed much of the latter payment.

Daniel Tepper/Bloomberg

Under the order, the San Francisco bank will pay a $1.7 billion penalty, which will go to the CFPB’s victims relief fund, and pay more than $2 billion to harmed consumers. A Wells Fargo spokesperson said much of the latter payment is already complete.

In a separate news release, Wells Fargo CEO Charlie Scharf said the bank has “made significant progress over the last three years and [is] a different company today.” 

Scharf joined the bank in late 2019 and was tasked with fixing the numerous regulatory issues that popped up after its fake-accounts scandal broke. The bank admitted in 2017 that employees opened 3.5 million potentially unauthorized consumer accounts over a nearly eight-year period.

“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,” Scharf said Tuesday.

The agency cited “systematic failures” in how Wells Fargo serviced auto loans for 11 million accounts. The bank incorrectly applied borrowers’ payments, improperly charged them fees and wrongfully repossessed their cars.

The order also covered Wells Fargo’s mortgage operations, which last year were part of a $250 million penalty from the Office of the Comptroller of the Currency. The CFPB said the bank wrongly denied thousands of customers loan modifications, which ultimately led to some foreclosures.

In addition, the CFPB cited numerous kinds of wrongdoing by Wells Fargo in the realm of checking accounts. The bureau said that Wells “made deceptive claims” about waivers on monthly service fees, froze consumers’ accounts based on faulty fraud protections and “unfairly charged surprised overdraft fees” to customers who had enough money in their accounts at the time they made a purchase.

Bloomberg News had reported in November that Wells was facing pressure from the CFPB to pay more than $1 billion to settle multiple investigations.