Wells Fargo could face $1 billion penalty for auto and mortgage abuses
Wells Fargo may pay a $1 billion penalty for forcing customers into car insurance and charging mortgage borrowers unfair fees.
The beleaguered bank warned on Friday that it may revise its first quarter earnings results because of the fine. The bank says that the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency have offered to resolve their investigations for that amount.
Wells Fargo apologized last year for charging as many as 570,000 clients for car insurance they didn’t need.
An internal review by Wells Fargo found that about 20,000 of those customers may have defaulted on their car loans and had their vehicles repossessed in part because of those unnecessary insurance costs.
In October, the bank revealed that some mortgage borrowers were inappropriately charged for missing a deadline to lock in promised interest rates, even though the delays were Wells Fargo’s fault.
Such a large fine would be a noteworthy move for the CFPB under Mick Mulvaney, the acting director appointed by President Trump.
As a congressman, Mulvaney called for the bureau’s destruction. And under his leadership, the bureau has delayed payday-loan rules, dropped lawsuits against payday lenders and stripped a fair-lending division of its enforcement powers. He told a House hearing this week that the bureau has not launched any enforcement actions since he took over last fall.
In February, the Federal Reserve handed down unprecedented punishment to Wells Fargo for what it called “widespread consumer abuses,” including its creation of as many as 3.5 million fake customer accounts.
Under that penalty, Wells Fargo won’t be allowed to get any bigger than it was at the end of last year — $2 trillion in assets — until the Fed is satisfied that it has cleaned up its act.
Wells Fargo said on Friday that the Fed’s actions had a “modest impact” on deposits. Consumer and small business banking deposits in the first quarter fell $2 billion from a year ago, to $755.5 billion.
CEO Tim Sloan told analysts that he can’t promise no new scandals will emerge.
“We’ve certainly had a thorough look in every nook and cranny in the company, and we’re continuing on that process,” he said. “[But] in terms of declaring victory and walking ahead, we’re not at that spot right now.”
Wells Fargo’s earnings beat analyst expectations overall.
— CNN’s Matt Egan contributed to this report.