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Wells Fargo ordered to pay $3.7 billion for ‘illegal activity’ including unfair foreclosures and vehicle repossessions

New York

Federal regulators fined Wells Fargo a record $1.7 billion on Tuesday for “widespread mismanagement” over several years that damaged more than 1[ads1]6 million consumer accounts.

The Consumer Financial Protection Bureau said Wells Fargo’s “illegal activity” included repeatedly misappropriating loan payments, wrongfully foreclosing on homes, illegally repossession of vehicles, misassessing fees and interest and charging surprise overdraft fees.

The CFPB ordered Wells Fargo ( WFC ) to pay the $1.7 billion civil penalty in addition to more than $2 billion to compensate consumers for a range of “illegal activity.” CFPB officials say this is the largest penalty imposed by the agency.

The misconduct described by the CFPB echoes previously reported revelations that have emerged about Wells Fargo since 2016 when the bank’s fake account scandal created a national firestorm.

“Wells Fargo’s rinse-repeat cycle of breaking the law has harmed millions of American families,” Rohit Chopra, the CFPB’s director, said in a statement.

Officials also made clear on Tuesday that Wells Fargo is far from out of the penalty box with regulators.

Chopra described Wells Fargo as a “repeat offender” and a “corporate recidivist,” adding that Tuesday’s fine is just a “first step” toward holding the bank accountable.

Speaking to reporters, Chopra said the new settlement should not be read as a signal that “Wells Fargo has moved past its long-standing problems or that the CFPB’s work is done here.”

Chopra noted, for example, that the settlement does not provide immunity for individuals at Wells Fargo, and the agency acknowledges that $3.7 billion in fines and restitution will not solve the bank’s problems.

While Chopra credited Wells Fargo for making some progress, he said it’s not clear “they’re making fast enough progress” and said the agency is concerned that the bank’s product launches, growth initiatives and profit-boosting efforts have “delayed needed reforms.”

Hinting at additional penalties to come, the CFPB official said regulators “need to consider whether additional restrictions need to be placed on Wells Fargo” beyond the unprecedented asset cap imposed in 2018.

In a statement, Wells Fargo emphasized that the far-reaching settlement with the CFPB resolves several cases, most of which have been “outstanding for several years.” The bank said the necessary actions are “already substantially complete”.

“We and our regulators have identified a number of unacceptable practices that we have worked systematically to change and provide customers with remediation where necessary,” Wells Fargo CEO Charlie Scharf said in the statement. “This far-reaching agreement is an important milestone in our efforts to transform the operating practices of Wells Fargo and put these issues behind us.”

Wells Fargo said it expects the CFPB settlement to cost it $3.5 billion before taxes in the fourth quarter.

According to the CFPB’s enforcement action, Wells Fargo had “systemic failures” in its auto loan business that damaged more than 11 million accounts. Those errors led Wells Fargo to wrongfully repossess some borrowers’ vehicles, falsely charge fees and interest and fail to refund certain fees, regulators say.

In addition, regulators say Wells Fargo wrongly denied thousands of mortgage modifications, causing some customers to lose their homes in “flawed foreclosures.”

“The bank was aware of the problem for many years before finally addressing the problem,” the CFPB said.

Wells Fargo also “unlawfully” charged surprise overdraft fees and “unlawfully” froze more than 1 million consumer accounts, blocking consumers from accessing their money for an average of at least two weeks.

The Wells Fargo scandal that began in 2016 shone a spotlight on Wells Fargo’s treatment of employees and customers, sparking congressional hearings, countless regulatory probes and the eventual ouster of two of the bank’s chief executives.

In her final act as chair of the Federal Reserve, Janet Yellen in February 2018 threw the book at Wells Fargo by imposing unprecedented penalties on the bank that remain in place today.

Senator Elizabeth Warren on Tuesday applauded the new penalties on Wells Fargo and pushed for even more.

“This fine is much-needed accountability after Wells Fargo repeatedly abused consumers,” Warren said on Twitteradding that more regulators should follow Chopra’s “lead to protect the public.

The CFPB said the more than $2 billion in customer refunds Wells Fargo has been ordered to pay includes more than $1.3 billion to consumers harmed by the bank’s auto loan tactics and more than $500 million for illegal overdraft fees and other misconduct related to deposit accounts.

Regulators said Wells Fargo has also been ordered to pay nearly $200 million in restitution to those harmed by the bank’s mortgage accounts.

Going forward, Wells Fargo has been ordered by the CFPB to ensure that auto loan borrowers receive refunds for certain surcharges and to stop charging bank account holders surprise overdraft fees.

The agency said these fees are imposed when customers have available funds at the time of purchase, but then had a negative balance when the transaction was settled.

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