Wells Fargo Could Face Another Record Fine
Wells Fargo (WFC) is in talks with the Consumer Financial Protection Bureau regarding penalties running into the hundreds millions of dollars, or possibly higher, for mortgage-lending and auto-insurance abuses, according to reporting from Reuters. The San Francisco bank’s troubles are long-running, likely to continue — and certain to be a hot topic when Mick Mulvaney, the CFPB’s acting director, testifies before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday.
Reuters cited three sources with knowledge of the plans in reporting that Mulvaney may be pushing for a record fine as high as $1 billion. The penalty would be the first by the CFPB under Mulvaney, tapped by President Donald Trump in November to head the consumer watchdog for finance.
Chances are good that Wells Fargo’s woes won’t disappear even if a record fine is levied. That’s because “the bank remains the ideal target for those on the far right and far left who believe the biggest banks are too large to manage,” Jaret Seiberg, an analyst with Cowen Washington Research group, wrote in a client note. “Even large fines do not put issues to rest. If anything, the size of the penalty is likely to result in even more political pressure on the bank.”
President Trump has also weighed in. He publicly vowed in December that Wells would pay a stiff price for “their bad acts against their customers.” Mr. Trump declared on Twitter that he would cut bank regulations but “make penalties severe when caught cheating.”
In addition to a potential CFPB fine, Wells may also have problems with another of its business lines. The U.S. Justice Department last year told Wells the bank needed to investigate its wealth management sales practices, according to a March report in The Wall Street Journal. The Journal noted that Justice became concerned after whistleblowers from the bank had accused Wells of pushing inessential products or services to customers. Sound familiar?
A Wells Fargo spokesperson said the bank was “not commenting on the reports,” while the CFPB didn’t return calls requesting comment.
The battering that Wells Fargo is still undergoing began in 2013 when the Los Angeles Times detailed how branch managers at Wells Fargo were pressured to meet sales quotas for new bank accounts and threatened with the loss of their jobs if they failed. That prompted an investigation by Los Angeles city officials, who filed suit against the bank in May 2015.
In September 2016, Wells estimated that 2.1 million accounts might have been created without customers’ consent and agreed to pay a then-record $185 million to regulators due to the practice. And attorneys who negotiated a $142 million class-action settlement with the bank in the summer of 2017 estimated the number of unauthorized accounts Wells created in the prior 15 years could total 3.5 million.
Despite insisting his bank’s illegal behavior originated with 5,300 low-level workers — who got fired — CEO John Stumpf eventually was forced to bow to the public outcry over the phony account scandal and stepped down in October 2016.
But the hits kept on coming. Here are some highlights of Wells’ ongoing tale of woe:
- The CFPB in August 2016 in restitution to student loan borrowers who allegedly paid inflated fees due to the bank’s improper actions. Wells settled but did not admit or deny guilt.
- Reports surfaced in January 2017 alleging Wells had engaged in a practice that improperly charged mortgage borrowers late fees, for the first time making public a letter sent in November to Congress by a former Wells loan officer who wrote of millions of dollars wrongly paid in the Los Angeles area alone.
- After a months-long internal probe into the alleged abusive practices, Wells in June 2017 announced an executive shakeup in its mortgage business, saying four people in the unit had left the bank.
- The bank last August announced a $108 million payment to the federal government to settle allegations it charged improper fees on home loans to veterans — and improperly took government payments when some of the loans went bad. Most other lenders settled claims stemming from a 2006 lawsuit in 2012.
- In a quarterly filing with the Securities and Exchange Commission in August 2017, Wells disclosed it might have created more unauthorized accounts than first thought, was the subject of a new federal inquiry and could face $1.3 billion more in legal costs than previously estimated.
- The Federal Reserve in February 2018 levied an unprecedented penalty against Wells, limiting the bank’s growth until it showed improved corporate governance. It also pushed it to replace four board members for what the regulator called “widespread consumer abuses and other compliance breakdowns.”
Author: Kate Gibson
Source: Money Watch
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