The Consumer Financial Protection Bureau has handed out its largest fine ever, to Wells Fargo Bank, N.A., over its mortgage and auto loan practices.
The Office of the Comptroller of the Currency also fined the bank $500 million over its risk management practices, which the CFPB credited against its own $1 billion fine.
The San Francisco-based bank violated the Consumer Financial Protection Act in the way it administered a mandatory insurance program related to its auto loans and in how it charged certain borrowers for mortgage interest rate-lock extensions, the bureau said.
The bank will be required to make restitution to customers harmed by its unsafe or unsound practices. It will also have to develop and implement an effective enterprise-wide compliance risk management program.
“I am especially pleased that we were able to work closely and effectively with our colleagues at the OCC, and I appreciate the key role they played in the negotiations,” said Acting Director Mick Mulvaney. “As to the terms of the settlement: we have said all along that we will enforce the law. That is what we did here.”
Because of the fine, Wells Fargo revised its first quarter earnings numbers, adjusting its net income down to $4.7 billion from $5.9 billion.
“While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency,” said CEO Timothy J. Sloan. “Our customers deserve only the best from Wells Fargo, and we are committed to delivering that.”
It’s been a rough couple years for Wells Fargo. Earlier this year, the Federal Reserve put growth restrictions on the bank and demanded it replace four of its board members over what it called “widespread consumer abuses and compliance breakdowns.”
The February cease and desist order would prevent Wells Fargo from growing larger than its asset size at the end of 2017 “until it sufficiently improves its governance and controls.” This was the first time the Fed has put a cap on a bank’s overall growth. Wells Fargo had $1.9 trillion in assets at the end of last year.
“We cannot tolerate pervasive and persistent misconduct at any bank and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again,” said Janet Yellen, who was chair of the Fed at the time.
Additionally, in September 2016, Wells Fargo was docked nearly $200 million by the CFPB, OCC and the city and county of Los Angeles for widespread practices around opening unauthorized consumer accounts. Sloan replaced former CEO John Stumpf in the wake of the scandal.
At the time, the $100 million fine levied by the CFPB was the largest it had given out.