Lending Abuses Earn Wells Fargo a $1 Billion Fine
Embattled and fraud-stricken bank Wells Fargo is once again under threat from federal regulators for abuses- this time stemming from adding unwanted insurance policies to auto loans and collecting significant commissions for the practice. In response, two federal agencies, the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC), imposed a fine of $1 billion against Wells Fargo in an attempt to send a stern message to the scandalous institution.
Perhaps as a result of its fraudulent behaviors, Wells Fargo posted a 5.3% increase in net revenues last quarter. The bank did note in its report to shareholders that the quarterly figures may need to be “revised to reflect additional accruals for the CFPB/OCC matter.”
This is not the only time Wells Fargo has come under fire for its behavior in the past few years. Much of Wells Fargo’s trouble stems from a fraudulent scheme by the bank to open secret accounts for customers and charge service fees and other expenses related to those accounts. An investigative report by the Los Angeles Times in 2013 initiated a multi-party investigation by the City and County of Los Angeles, the Federal Reserve’s Office of the Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB). The investigation culminated in a record $185 million fine for the bank and the dismissal of over 5,000 Wells Fargo employees.
Navajo Nation Attorney General Ethel Branch filed a lawsuit in federal court late last year against Wells Fargo alleging the embattled bank defrauded hundreds of Navajo elders, youth, and other vulnerable populations by opening unauthorized bank accounts. The tribe is suing the bank for $50 million in damages related to the fraudulent activity through the Equal Credit Opportunity Act, the Consumer Financial Protection Act, the Electronic Funds Transfer Act, and the Truth in Lending Act.
Acting CFPB Director Mick Mulvaney took significant criticism from Congressional Democrats last week at hearings in the House and Senate over his enforcement record (or lack thereof) since taking over the post last November. A $1 billion fine against one of the industry’s worst actors could go far to assuage Democratic fears that Mulvaney is dismantling the consumer agency.
