By Terrance Turner
Dec. 20, 2022
Wells Fargo has agreed to pay $3.7 billion to settle a laundry list of charges that it harmed consumers by charging illegal fees and interest on both auto loans and mortgages, plus misapplied overdraft fees on both checking and savings accounts.
The Consumer Financial Protection Bureau (CFPB) ordered Wells Fargo to pay more than $2 billion in redress to customers. The bank must also pay a $1.7 billion civil penalty — the largest fine ever issued against a bank.
“Put simply, Wells Fargo is a corporate recidivist that puts one third of American households at risk for potential harm,” says CFPB President Rohit Chopra. “Finding a permanent resolution to this bank’s pattern on unlawful behavior is a top priority. Today, CFPB is announcing an important step toward that goal: restitution for victims of Wells Fargo’s widespread illegal activities.”
In its press release today, the CFPB made its case. “The bank’s illegal conduct led to billions of dollars in financial harm to its customer and, for thousands of customer, the lasos of their vehicles and homes. Consumers were illegally assessed fees and interest charges on auto and mortgage loans,” the Bureau says. Additionally, consumers “had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank.” Wells Fargo also charged illegal overdraft fees, per the CFPB.
Unlawfully Repossessed Vehicles
Wells Fargo systematically failed in servicing auto loans, the Bureau says. Those failures caused a total of $1.3 billion in harm to 11 million accounts. The bank incorrectly applied borrowers’ payments, improperly charged fees/interest, and wrongfully repossessed borrowers’ vehicles. The bank also failed to ensure refunds on fees for add-on products when loans ended early.
Wells Fargo improperly denied mortgage modifications. During at least a seven-year period, the bank improperly denied modifications to mortgage loans. That led, in some cases, to customers losing homes in wrongful foreclosures. And it led to a class-action lawsuit against the bank.
According to the New York Post, two homeowners filed a lawsuit against the bank in 2019. “According to the suit, the bank told certain underwater mortgage holders that they could qualify for reduced monthly payments — and keep their homes — if they followed certain procedures,” the Post says. But when it was time to reduce payments, the bank rejected borrowers due to “title issues”. Those issues weren’t disclosed in advance.
Overdraft Fees And Frozen Accounts
For years, Wells Fargo improperly charged surprise overdraft fees — fees charged even though consumers had enough money in their account to cover the transaction. The bank charged these on both debit card and ATM transactions, per the Bureau. (These fees are known as “authorized positive fees”. The CFPB has warned against the practice since 2015.
The bank also froze over a million accounts based on faulty suspicion of fraudulent deposits, per the CFPB. As a result, consumers were unable to access any of their money for an average of two weeks.
Wells Fargo is one of the largest banks in the country. It offers a variety of financial services, including mortgages, auto loans, savings & checking accounts, and online banking. One in three American households are customers, per the CFPB. It’s one of the largest four banks in the country.
But it’s also a repeat offender. Wells Fargo has run afoul of the CFPB multiple times. In 2015, CFPB ordered Wells Fargo to pay $24 million in penalties for its role in an illegal mortgage kickback scheme. In 2016, the bank paid $4 million to the CFPB for scamming student loan borrowers. A few months later, the CFPB fined Wells Fargo $100 million for account fraud. And in 2018, the CFPB assessed a $1 billion fine for illegal fees and insurance practices in its auto lending and mortgage lending. But the 2016 scandal was arguably the most damning.
Fake Accounts Scandal
In 2016, Wells Fargo made headlines after being fined $185 million for illegal banking practices. It had opened 1.5 million fake bank accounts and filed over 500,000 credit card applications without customers’ knowledge or consent, per the New York Times. Bloomberg later reported that the total number of fraudulent accounts was up to 3.5 million. Last year, the Times revealed that Wells Fargo had reached a $3 billion settlement to settle criminal charges and civil action related to its actions.