Wells Fargo and Co. reached a $3.7 billion settlement with federal regulators, including a record $1.7 billion fine, to cover allegations that it mistreated millions of customers for years, some of whom lost their cars or homes.
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The settlement with the Consumer Financial Protection Bureau includes more than $2 billion in "restitution to consumers," the CFPB said in a statement Tuesday, citing "widespread mismanagement" of auto loans, mortgages and savings accounts.
"Wells Fargo's rinse-and-repeat cycle of violating the law has harmed millions of American families," CFPB Director Rohit Chopra said in a statement. "The CFPB is ordering Wells Fargo to return billions of dollars to consumers across the country. This is an important first step toward accountability and long-term reform of this repeat offender".
Under the leadership of CEO Charlie Scharf, Wells Fargo has attempted to address a number of issues and scandals that emerged in 2016, when it was revealed that the bank had opened millions of fake accounts. Problems arose across industries, leading to the removal of two CEOs and a series of costly sanctions, including the Federal Reserve's decision to freeze the assets. of the company.
The bank set aside $2 billion in the third quarter to cover various regulatory and legal issues, including for injured customers serving the whole. Scharf warned in October that the indictment "is not the end of it."
"We and our regulators have identified a number of unacceptable practices that we have systematically worked to change and provide customers with the resources they deserve," Scharf said in a separate statement. "This comprehensive settlement is an important milestone in our work to transform Wells Fargo and put these issues behind us."
The bank settled with the CFPB without acknowledging the agency's allegations. Wells Fargo said it expects a pretax operating loss of about $3.5 billion in the fourth quarter, which includes civil penalties and remedial costs from the CFPB and other legal expenses.
Lost Homes
The agency said Wells Fargo illegally repossessed vehicles, tampered with payment information and falsely claimed fees and interest. It says the bank's servicing failures occurred between at least 2011 and 2022. In , mortgages, the CFPB said the bank improperly denied mortgage modifications for seven years, causing some customers to lose their homes. The bank illegally charged surprise credit fees and, in more than a million cases, illegally froze consumer accounts based on "a faulty automated filter that may have been a fraudulent deposit."
Chopra previously promised to make the penalties for large companies more painful. In 2016, the agency fined San Francisco-based Wells Fargo $100 million for opening accounts without customers' permission. In 2018, he imposed a $1 billion penalty for further misconduct, but gave the bank $500 million in credit for a concurrent investigation with the Office of the Comptroller of the Currency.
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