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Wells Fargo, the largest depository lender in the United States, has agreed to pay a $1.7 billion civil penalty to settle several consent orders related to auto loans, consumer savings accounts, and mortgages with the Consumer Financial Protection Bureau (CFPB).
According to the CFPB, the bank repeatedly defaulted on loans, foreclosed on its property, illegally repossessed vehicles, and charged unexpected overdraft fees that affected 16 million customer accounts.
As a result, the bank will also pay more than $2 billion in compensation to consumers.
CFPB Director Rohit Chopra said in a statement that Wells Fargo’s illegal purge cycle has harmed millions of American families.
The CFPB is ordering Wells Fargo to refund billions of dollars to consumers nationwide. This is an important first step towards accountability and long-term reform of this persistent offender.
In practice, the banks adopted a new consent decree that set the path for the termination of the contract after the company completed the remaining necessary activities.
Wells Fargo CEO Charlie Schaff said in a statement that they and their supervisors have identified many unacceptable practices that we have systematically worked to change and provide redress to customers where appropriate.
They have made significant progress over the past three years and are a different company today.
The settlement includes the termination or expiration of four consent orders issued since 2020 for ancillary products the bank sold to retail customers before 2015; an anti-money laundering program; retail practice; and Violations of the Law on Property Management Procedures Behavior. The CFPB also ended a 2016 consent decree related to student loan servicing.
The bank stated that since 2019 it has restructured its business, which included the division of the business group from three to five, the creation of four new business functions, and the creation of a new control management process and the operation of the consumer or practice office.
However, resolving these issues will impact the bank’s fourth-quarter earnings, which are expected to be released on January 13, 2023.
Wells Fargo will incur approximately $3.5 billion in “business loss” and customer restitution fees related to the CFPB’s civil penalty in the fourth quarter of 2023.
In the mortgage industry, the CFPB alleges that Wells Fargo improperly refused to modify the mortgages of thousands of borrowers for at least seven years, in some cases causing customers to lose their homes to illegal foreclosures.
The CFPB said Wells Fargo was aware of the problem for years before addressing it.
Wells Fargo, the largest US mortgage lender, issued mortgage loans of $21.5 billion in the third quarter of 2022, which is 37% less than the previous quarter. Refinancing decreased to 16% of the portfolio.
The bank laid off its mortgage lenders several times, including hundreds of workers in December.
Reference Source: Housing Wire
