“Between at least 2011 and 2022, 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,” CFPB Director Rohit Chopra said in prepared remarks. “Consumers were also charged unlawful surprise overdraft fees and had other incorrect charges applied to their checking and savings accounts.”
Under the terms of the CFPB order, issued Dec. 20, Wells Fargo must provide more than $2 billion in redress to over 16 million consumers. Of this amount, consumers affected by illegal conduct related to the bank’s auto finance business line will receive more than $1.3 billion, while those affected by violations related to deposit accounts will receive more than $500 million, and mortgage servicing customers will receive nearly $200 million.
“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,” the CFPB stated. Additionally, the CFPB has ordered Wells Fargo pay $1.7 billion in penalties that will be used to provide relief to victims of consumer financial law violations.
Compliance Violations
According to the CFPB, Wells Fargo engaged in the following violations across many of the bank’s largest product lines:
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: For at least seven years, 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 on debit card transactions and ATM withdrawals, “even though consumers had enough money in their account to cover the transaction at the time the bank authorized it.”
Unlawfully froze consumer accounts and mispresented fee waivers: The bank froze more than one million consumer accounts due to “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. The bank also made deceptive claims as to the availability of waivers for a monthly service fee.”
Resolution Terms
According to the CFPB, Wells Fargo violated the Consumer Financial Protection Act’s prohibition on “unfair and deceptive acts and practices.” In addition to the more than $2 billion in redress Wells Fargo must pay to harmed consumers, the CFPB has further ordered Wells Fargo to “stop charging surprise overdraft fees.”
Furthermore, the CFPB ordered Wells Fargo to “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.”
“This milestone in accountability and reform of Wells Fargo would not be possible without the cooperation and support from the broader law enforcement and regulatory community, including the Office of the Comptroller of the Currency and the Federal Reserve,” Chopra said.
‘Corporate Recidivist’
Calling Wells Fargo a “corporate recidivist,” Chopra said in the CFPB’s 11-year existence Wells Fargo has “consistently been one of the most problematic repeat offenders of the banks and credit unions we supervise.” He specifically cited the following enforcement actions:
- In 2015, CFPB ordered Wells Fargo to pay $24 million in penalties for its role in an illegal mortgage kickback scheme.
- In 2016, Wells Fargo paid $4 million to the CFPB for scamming student loan borrowers, and was then fined $100 million by the CFPB a few months later for its fake account scandal.
- In 2018, the CFPB assessed a $1 billion fine for illegal fees and insurance practices in Wells Fargo’s auto lending and mortgage lending business.
“The list could go on and on, from defrauding the government to labor abuses and more,” Chopra said. The Department of Justice, state attorneys general, and other federal regulators have additionally obtained billions more in forfeitures, including civil and criminal fines.
The CFPB’s enforcement action “should not be read as a sign that Wells Fargo has moved past its longstanding problems or that the CFPB’s work here is done,” Chopra added. “Importantly, the order does not provide immunity for any individuals, nor, for example, does it release claims for any ongoing illegal acts or practices.”
“While $3.7 billion may sound like a lot, the CFPB recognizes that this alone will not fix Wells Fargo’s fundamental problems,” Chopra continued. “Over the past several years, Wells Fargo executives have taken steps to fix longstanding problems, but it is also clear that they are not making rapid progress. We are concerned that the bank’s product launches, growth initiatives, and other efforts to increase profits have delayed needed reform.”
The CFPB will continue to work with other federal banking regulators “to end the rinse-repeat cycle of consumer abuse at this firm,” Chopra concluded.
Wells Fargo Responds
“As we have said before, 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 Chief Executive Officer Charlie Scharf said in a prepared statement. “This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us.”
“Our top priority is to continue to build a risk and control infrastructure that reflects the size and complexity of Wells Fargo and run the company in a more controlled, disciplined way,” Scharf added. “We have made significant progress over the last three years and are a different company today. We remain committed to doing the right thing for our customers and working closely with our regulators and others to deal appropriately with any issue that arises.” 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.