US fines Wells Fargo $1 bn for mortgage, auto loan violations
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Wells Fargo agreed Friday to pay $1 billion in fines over US allegations of bank misconduct that damaged consumers — the largest such penalty so far under the administration of President Donald Trump, who has lambasted the scandal-hit bank.
The big US bank, which has been under fire in the wake of a 2016 fake accounts scandal, will pay the fines to resolve alleged deficiencies in its mortgage and auto loan businesses uncovered by the Office of the Comptroller of the Currency and the Bureau of Consumer Financial Protection.
The OCC and the consumer bureau found that Wells Fargo improperly charged some customers in its auto loan program and in some cases, “improperly repossessed” vehicles from borrowers who were unable to pay, said a regulatory order from the agencies.
They also found Wells Fargo had wrongly charged some customers when mortgages failed to be secured by the “lock” deadline for guaranteeing an interest rate, even in cases where the bank itself was responsible for the missed deadlines.
Wells Fargo was fined “given the severity of the deficiencies and violations of law, the financial harm to consumers, and the bank’s failure to correct the deficiencies and violations in a timely manner,” the OCC said in a news release.
The bank neither admitted nor denied the allegations.
But the penalty is the latest regulatory problem to befall Wells Fargo, which also came under criticism from investors and lawmakers over a fake accounts scandal. The Federal Reserve, in an unprecedented move, in February ordered the bank to halt its expansion until it improves governance, following “persistent misconduct.”
Wells Fargo Chief Executive Tim Sloan said the company had made progress in strengthening its compliance and governance programs and “make things right for our customers.”
The company will adjust its first quarter earnings $800 million downward due to the penalty, which is not tax deductible. That reduces net profit from $5.5 billion to $4.7 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,” Sloan said.
Wells Fargo escaped much of the regulatory fallout experienced by peers such as Bank of America and JPMorgan Chase from the 2008 financial crisis, but has encountered withering criticism since the fake accounts scandal, in which it opened about 3.5 million deposit and credit accounts without customer knowledge.
The bank has repeatedly apologized for the scandal — which cost it the top ranking as the world’s largest bank by market capitalization — and overhauled its leadership team. It has also significantly remade its board of directors after several members were barely reelected at a contentious annual shareholder meeting last April.
The bank avoided one tricky debate for this year’s gathering when it agreed in March to undertake a board review of its business standards. In exchange, the Interfaith Center on Corporate Responsibility agreed to withdraw a shareholder proposal requesting “a comprehensive report on the root causes of past and present fraudulent activities.”
Still, executives could encounter more harsh questions at this year’s meeting, which will be held in Des Moines, Iowa on Tuesday.
Trump, who has favored cutting some bank regulations imposed after the 2008 financial crisis, lambasted Wells Fargo in December, saying on Twitter that fines would be boosted for “their bad acts against their customers.”
Consumer advocacy group Public Citizen lauded Friday’s announcement as reflecting “signs of life at the Trump-run CFPB and Comptroller,” but added that “this can’t end accountability for Wells Fargo’s widespread misconduct.”
“Shareholders, who will be footing the bill for this fine, did not conceive, oversee and conceal this massive fraud. Wells Fargo executives did,” the group said.
“Meanwhile, the Republican corporate tax cut more than offsets this penalty,” Public Citizen said.
“Wells Fargo is spending some of this benefit on share buybacks, which boost the price and senior management compensation. On balance, these are good times for Wells Fargo executives.”
Shares of Wells Fargo rose 2.0 percent to $52.56. (AFP) Photo by atiretoo