Wells Fargo on Tuesday agreed to a $3.7 billion settlement with the Consumer Financial Protection Bureau (CFPB) to resolve allegations against the banking giant for misapplied loans, wrongfully foreclosed homes and illegally repossessed vehicles.
CFPB said it ordered Wells Fargo to pay $2 billion to customers affected by its policies and a $1.7 billion civil penalty for the legal violations.
The settlement resolves accusations of wrongdoing before 2020, when Wells Fargo launched corrective actions after the CFPB forced the company into several consent decrees.
Wells Fargo’s policies over the years harmed thousands of customers and led to billions of dollars in losses, according to the CFPB.
CFPB Director Rohit Chopra said Tuesday’s settlement was an “important initial step for accountability and long-term reform of this repeat offender.”
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” Chopra said in a statement.
The $1.7 billion civil penalty will go into the federal government’s Civil Penalty Fund, which can be used to compensate victims of harmful policies.
As part of the agreement, CFPB will terminate a consent decree from 2016 related to student loan servicing and is working on ending a 2018 consent decree related to home mortgages and auto loans, according to Wells Fargo.
Wells Fargo CEO Charlie Scharf, who took the job in 2019, said in a statement that management has “identified a series of unacceptable practices” over the years and is “working systematically to change and provide customer remediation where warranted.”
“This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us,” Scharf said on Tuesday. “We have made significant progress over the last three years and are a different company today.”
One of the charges against Wells Fargo states that they have denied thousands of people mortgage loan modifications over a seven-year period, which resulted in the wrongful foreclosure of homes, CFPB said.
The bank also charged surprise overdraft fees against customers who had enough money to cover an expense; authorized improper fees and interest in auto loans, sometimes illegally repossessing vehicles; and froze more than 1 million consumer accounts based on false flags of fraudulent activity.
Wells Fargo said it has since implemented several changes to the harmful policies as recommended by CFPB.