To resolve allegations from authorities that it exploited millions of customers, banking giant Wells Fargo has agreed to pay $1.7 billion in legal penalties and more than $2 billion in consumer restitution.
The settlement for the California-based bank that serves customers in Bucks County, including the Levittown area, is with the federal Consumer Financial Protection Bureau. While specific locations were not released by authorities, the scale of those impacted means local residents were likely violated by the schemes and could be eligible for the settlement.
Consumer Financial Protection Bureau Director Rohit Chopra said one in three American households are Wells Fargo customers.
“The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes. Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank. Wells Fargo also charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts,” according to a statement from the Consumer Financial Protection Bureau.
The Consumer Financial Protection Bureau has never imposed a fine of this size against a bank. Wells Fargo has been working for years to repair its reputation following a slew of scandals related to its sales practices to ripped off customers.
“In the Consumer Financial Protection Bureau’s eleven years of existence, Wells Fargo has consistently been one of the most problematic repeat offenders of the banks and credit unions we supervise,” Chopra said in remarks.
“Put simply, Wells Fargo is a corporate recidivist that puts one third of American households at risk of harm,” Chopra added.
Within the last 10 years, Wells Fargo was behind an illegal mortgage kickback scheme, was caught scamming student loan borrowers, its employees took part in a fake account fraud scheme, and the bank had to paid a $1 billion fine for illegal fees and insurance practices in its auto lending and mortgage lending business, according to federal officials.
In the last decade, Levittown-area law enforcement had previously said they had received reports of local residents impacted by the widespread fake account fraud.
“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,” Wells Fargo’s CEO Charlie Scharf said in a statement provided to NPR News.
The Consumer Financial Protection Bureau plans to keep working with regulators to “end the rinse-repeat cycle of consumer abuse at this firm,” Chopra said.
Below are details from the Consumer Financial Protection Bureau’s investigation:
• Unlawfully repossessed vehicles and bungled borrower accounts: Wells Fargo had systematic failures in its servicing of automobile loans that resulted in $1.3 billion in harm across more than 11 million accounts. The bank incorrectly applied borrowers’ payments, improperly charged fees and interest, and wrongfully repossessed borrowers’ vehicles. In addition, the bank failed to ensure that borrowers received a refund for certain fees on add-on products when a loan ended early.
• Improperly denied mortgage modifications: During at least a seven-year period, the bank improperly denied thousands of mortgage loan modifications, which in some cases led to Wells Fargo customers losing their homes to wrongful foreclosures. The bank was aware of the problem for years before it ultimately addressed the issue.
• Illegally charged surprise overdraft fees: For years, Wells Fargo unfairly charged surprise overdraft fees – fees charged even though consumers had enough money in their account to cover the transaction at the time the bank authorized it – on debit card transactions and ATM withdrawals. As early as 2015, the CFPB, as well as other federal regulators, including the Federal Reserve, began cautioning financial institutions against this practice, known as authorized positive fees.
• Unlawfully froze consumer accounts and mispresented fee waivers: The bank froze more than 1 million consumer accounts based on a faulty automated filter’s determination that there may have been a fraudulent deposit, even when it could have taken other actions that would have not harmed customers. Customers affected by these account freezes were unable to access any of their money in accounts at the bank for an average of at least two weeks. The bank also made deceptive claims as to the availability of waivers for a monthly service fee.
The settlement between the Consumer Financial Protection Bureau and Wells Fargo orders the bank to:
• Provide more than $2 billion in redress to
consumers: Wells Fargo will be required to pay redress totaling more
than $2 billion to harmed customers. These payments represent refunds of
wrongful fees and other charges and compensation for a variety of harms such as
frozen bank accounts, illegally repossessed vehicles, and wrongfully foreclosed
homes. Specifically, Wells Fargo will have to pay:
‣ More than $1.3 billion
in consumer redress for affected auto lending accounts.
‣ More than $500 million
in consumer redress for affected deposit accounts, including $205 million for
illegal surprise overdraft fees.
‣ Nearly $200 million in
consumer redress for affected mortgage servicing accounts.
• Stop charging surprise overdraft fees: Wells Fargo may not charge overdraft fees for deposit accounts when the consumer had available funds at the time of a purchase or other debit transaction, but then subsequently had a negative balance once the transaction settled. Surprise overdraft fees have been a recurring issue for consumers who can neither reasonably anticipate nor take steps to avoid them.
• Ensure auto loan borrowers receive refunds for certain add-on fees: Wells Fargo must ensure that the unused portion of GAP contracts, a type of debt cancellation contract that covers the remaining amount of the borrower’s auto loan in the case of a major accident or theft, is refunded to the borrower when a loan is paid off or otherwise terminates early.
