Wells Fargo reached a $3.7 billion deal with regulators over the bank's "widespread mismanagement" that allegedly hit more than 16 million consumer accounts.
The Consumer Financial Protection Bureau said Wells Fargo's systemic failures included some stuff that's so egregious you kinda have to wonder whether the bank was just, like, testing how evil it could be before it got caught. Things like:
- Repeatedly misapplying loan payments
- Wrongfully foreclosing on homes
- Illegally repossessing vehicles
- Incorrectly assessing fees and interest
- Charging surprise overdraft fees
A full $2 billion of the settlement is going to compensate customers. (Which, I'm sure is a welcome payday, though it can hardly undo the trauma of having your house wrongfully foreclosed on or your car taken away...)
The watchdog agency also ordered Wells Fargo to pay a $1.7 billion civil penalty.
KEY CONTEXT
Sadly, all of this echoes earlier reports about Wells Fargo's practices that have emerged since 2016, when its fake-accounts scandal made national headlines, my colleague Matt Egan writes.
As a refresher: Back then, the bank's leadership was found to have pressured rank-and-file employees to aggressively push consumer products to boost sales and revenue to meet certain quotas. Wells Fargo workers ended up creating millions of bank accounts for customers without their knowledge.
In 2020, the bank paid $3 billion to the Justice Department and Securities and Exchange Commission after admitting that, between 2002 and 2016, it pressured employees to meet "unrealistic sales goals that led thousands of employees to provide millions of accounts or products to customers under false pretenses or without consent, often by creating false records or misusing customers' identities."
The good news is the fraud was snuffed out and the really rich, powerful people who are responsible for it all went to jail... I'm kidding. This is America. A few executives have faced charges of misleading investors, though most have settled out of court, because they're rich and can afford to pay hefty fees (unlike many of the customers they bilked out of hard-earned cash.)
Wells has been trying to right itself and move past the scandal. It's not going great.
Here's the CFPB's director, Rohit Chopra, on Tuesday's settlement:
"Wells Fargo's rinse-repeat cycle of violating the law has harmed millions of American families."
The bank is still very much in the penalty box. Chopra described Wells Fargo as a "repeat offender" and a "corporate recidivist," adding that Tuesday's fine is just an initial step toward holding the bank accountable.
In response, Wells Fargo emphasized that the broad-reaching settlement with the CFPB resolves multiple matters, most of which have been "outstanding for several years."
The bank said the required actions are "already substantially complete."
"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," said Wells Fargo CEO Charlie Scharf, who took the helm in 2019 with a mission to clean up the mess left by his predecessors.
TIME FOR A BREAKUP?
The web of scandals at Wells Fargo is massive, and after six years of fallout, a lot of folks aren't convinced the bank can save itself.
"This latest litany of lawbreaking cannot be fairly characterized or dismissed as mere 'mismanagement,'" wrote Dennis Kelleher, CEO of the nonprofit Better Markets, calling for regulators to consider breaking up the bank. "This type of longstanding pattern and practice of illegal activities is more frequently seen in criminal enterprises, not at gigantic US banks. Any other business in America with such a recidivist record of breaking the law...would almost certainly have already been shut down."
The breakup idea would likely have support. Senator Elizabeth Warren last year urged the Fed to revoke Wells Fargo's status as a financial holding company and require it to separate its traditional banking activities from nonbanking activities.
"The only way these consumers and their bank accounts can be kept safe is through another institution —one whose business model is not dependent on swindling customers for every last penny they can get," Warren wrote in a letter to the central bank.
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