CFPB Levies Record $3.7B Fine on Wells Fargo

The CFPB fined Wells Fargo a $3.7 billion fine for its handling of loans and banking programs.

The record penalty, announced Tuesday (Dec. 20), exceeds the $2 billion the banking giant had set aside in anticipation of a regulatory settlement of the case. 

According to Consumer Financial Protection Bureau (CFPB), the penalty stems from a series of alleged “illegal” acts, which include illegally assessing fees and interest charges on loans, wrongful car repossessions, and unlawful overdraft fees.

“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said CFPB Director Rohit Chopra. “The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”

The CFPB broke the fine into two parts: $2 billion to redress consumers and a $1.7 billion civil penalty “for legal violations across several of its largest product lines.”

A Wells Fargo spokesperson told PYMNTS much of the customer remediation was already complete. A news release from the bank characterized the agreement as the resolution of several ongoing issues.

“As we have said before, we and our regulators have identified a series of unacceptable practices that we have been working systematically to change and provide customer remediation where warranted,” said Wells Fargo CEO Charlie Scharf.

“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.”

In addition to the fine, the bureau also ordered Wells Fargo to end the practice of surprise overdraft fees, or fees for deposit accounts “when the consumer had available funds at the time of a purchase or other debit transaction, but then subsequently had a negative balance once the transaction settled.”

Earlier this year, the CFPB said these fees were probably illegal.

“Often, the financial institution relies on complex back-office practices to justify charging the fee,” the CFPB said. “For instance, after the bank allows one debit card transaction when there is sufficient money in the account, it nonetheless charges a fee on that transaction later because of intervening transactions.”

The CFPB had previously warned that as banks collected billions of dollars in overdraft fees, they would price some consumers out of traditional banking services. Many banks, including Citi, Ally, and Capital One, have begun to do away with the fees.

News of the bureau’s action emerged in November, with reports saying the CFPB would fine Wells Fargo more than $1 billion, a settlement that surpassed the agency’s previous record and was set by Wells Fargo. That happened in 2018 when the bank paid $1 billion after the CFPB accused it of overcharging on mortgages and tacking insurance costs and fees onto some auto loans through a mandatory insurance program.