Wells Fargo has been fined $1 billion by regulators over fraudulent auto loan practices and mortgage violations.
The bank charged borrowers additional fees for interest rate-lock extensions despite the delays being caused by the bank and unfairly charged customers for auto insurance that they didn’t need or were not even aware of.
The Consumer Financial Protection Bureau (CFPB) reviewed the conduct of the bank and found that it had “unfairly failed to follow the mortgage-interest-rate-lock process it explained to some prospective borrowers,” and “operated its Force-Placed Insurance program in an unfair manner.”
Chief Executive Tim Sloan stated in a press release:
“For more than a year and a half, we have made progress on strengthening operational processes, internal controls, compliance and oversight, and delivering on our promise to review all of our practices and make things right for our customers.
“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. Our customers deserve only the best from Wells Fargo, and we are committed to delivering that.”
Wells Fargo will adjust its first-quarter earnings to reflect the fine. Net income for the quarter will take an $800 million hit.
A blow to the bank’s reputation
“Operationally, Wells Fargo can recover, but reputationally and how a billion dollars will weigh on them — only time can tell,” Art Hogan, chief market strategist at B. Riley in Boston, told Reuters. “Companies have come back from worse than this but right now they’re still in the eye of the storm.”
Customers lost trust in the bank after a huge unauthorized accounts scandal last year. Wells Fargo admitted to opening about 3.5 million bank and credit-card accounts not authorized by customers – the bank had to pay $185 million in penalties.