Blog Detail

Wells Fargo to pay $3.7 billion as directed by Consumer Financial Protection Bureau (CFPB)

Wells Fargo Bank has been ordered to pay more than $2 billion in customer redress and a $1.7 billion civil penalty by the Customer Financial Protection Bureau (CFPB) for breaking the law across many of its main product lines. Millions of consumers suffered financial losses of billions of dollars as a result of the bank’s unlawful actions, and thousands of them lost their homes and cars.

Consumers had their fees and interest rates unfairly assessed on auto and mortgage loans, their vehicles were wrongfully seized, and the bank improperly applied their payments to those loans. 

Additionally, Wells Fargo imposed various mistakes related to savings and checking accounts in addition to illegally charging customers unexpected overdraft fees. According to the terms of the ruling, Wells Fargo must compensate the over 16 million impacted consumer accounts and pay a $1.7 billion fine to the Consumer Finance Protection Bureau (CFPB), which will be used to help those who have been harmed by violations of consumer finance laws.

Rohit Chopra, director of the Consumer Financial Protection Bureau, stated that Wells Fargo’s pattern of breaking the law has hurt millions of American families.  Wells Fargo has been ordered by the Consumer Financial Protection Bureau to repay billions of dollars to customers nationwide. The accountability and long-term change of this persistent offender will depend on this crucial first step.

One of the biggest banks in the country, Wells Fargo (NYSE: WFC), provides financial services to people nationwide. It provides a range of consumer financial services, such as vehicle loans, checking and savings accounts, mortgages, and Internet banking.

With crimes spanning all of the bank’s main product lines, Wells Fargo allegedly caused millions of customers to harm throughout a period of several years. Specifically, the CFPB found that Wells Fargo:

1. Unlawfully repossessed vehicles and bungled borrower accounts: 

Over 11 million accounts at Wells Fargo suffered damages totaling $1.3 billion as a consequence of systemic errors in the servicing of vehicle loans. Incorrectly applying for borrower payments, imposing penalties and interest, and unlawfully seizing borrower cars were all mistakes made by the bank. The bank also neglected to make sure that when a loan was terminated early, consumers got a refund for any add-on product costs.

2. Mortgage modifications that were incorrectly denied:

The bank illegally rejected thousands of requests for mortgage loan modifications over the course of at least seven years, which in some cases resulted in Wells Fargo clients lacking their homes to erroneous foreclosure. Before finally addressing the issue, the bank had been aware of the issue for years.

3. Unlawfully imposed unexpected borrowing fees:

Years ago, Wells Fargo unfairly imposed unexpected overdraft penalties on debit card transactions and ATM withdrawals, even though customers had sufficient funds in their accounts to pay the transaction at the time the bank permitted it. The CFPB and other federal authorities, such as the Federal Reserve, started warning financial institutions not to engage in this practice, also known as permitted positive fees, as early as 2015.

4. Consumer accounts, illegally frozen and fake fee waivers: 

Even though there were other options the bank might have taken that would not have hurt customers, it decided to freeze more than 1 million client accounts because of a flawed automated filter’s suspicion of a fraudulent deposit. 

For an average of at least two weeks, customers who had their accounts frozen at the bank were forbidden to access any of their funds. As for the possibility of exemptions for a recurring charge, the bank again made false statements.

Wells Fargo is a recurring violator who has been the target of several enforcement proceedings by the CFPB and other agencies for breaches throughout its lines of business, including flawed student loan servicing, mortgage bribes, fictitious accounts, and detrimental car lending practices.

Enforcement Action Against Wells Fargo

The Consumer Finance Protection Act gives the Consumer Financial Protection Bureau (CFPB) the power to take legal action against institutions that violate federal consumer finance laws, including by engaging in unfair, misleading, or abusive conduct or practices. The CFPB’s inquiry revealed that Wells Fargo had broken the Act’s ban on unfair and deceptive conduct and practices.

According to the CFPB decision, Wells Fargo needs to:

a.) Give consumers compensation worth more than $2 billion:

Customers who were injured by Wells Fargo will get compensation involving more than $2 billion. These payments serve as reimbursements for incorrect fees and other charges as well as damages for a range of wrongdoings, including the freezing of bank accounts, the taking of cars without authorization, and the improper foreclosure of residences. Wells Fargo will have to pay, specifically:

• consumers will get more than $1.3 billion in compensation for impacted car financing accounts.
• Consumer compensation for impacted deposit accounts totaling more than $500 million, including $205 million for erroneous unexpected overdraft penalties.
• Consumer compensation for impacted mortgage servicing accounts totaled about $200 million.

b.) Stop assessing unexpected overdraft fees:

When a customer has available money when making a purchase or engaging in another debit activity, but later has an unpaid balance after the transaction is settled, Wells Fargo is not permitted to impose overdraft charges for deposit accounts. Consumers who cannot adequately predict or prevent them frequently experience unexpected overdraft costs.

c.) Ensure that borrowers of vehicle loans are reimbursed for specific add-on fees: 

When a loan is paid off early or for any other reason, Wells Fargo is required to make sure that the borrower receives the unused portion of GAP contracts, a kind of bankruptcy contract that covers the remaining balance of the borrower’s vehicle loan in the event of a significant accident or theft.

d.) Penalty payment of $1.7 billion:

Wells Fargo will pay a $1.7 billion fine to the Consumer Financial Protection Bureau, which will be added to the CFPB’s victim’s compensation fund.

You may follow the link to go through the order of CFPB against Wells Fargo:

2022-CFPB-0011_Wells Fargo Bank N.A. – Consent Order

About CFPB Services

By visiting the CFPB website or by dialing (855) 411-CFPB (2372), customers who are having persistent issues with Wells Fargo or other financial institutions can file complaints. Additionally, the Bureau provides information to customers on savings accounts, vehicle loans, and mortgage servicing:

•  Automobile loans are available at:

https://www.consumerfinance.gov/consumer-tools/auto-loans.

• Bank Accounts:

https://www.consumerfinance.gov/consumer-tools/deposit-accounts/.

*The article was originally posted on – CFPB (CFPB Orders Wells Fargo to Pay $3.7 Billion for Widespread Mismanagement of Auto Loans, Mortgages, and Deposit Accounts | Consumer Financial Protection Bureau (consumerfinance.gov))