Wells Fargo, the lender grappling with fallout over millions of phony accounts and government restrictions on its growth, agreed to pay $1 billion in civil penalties to settle investigations of its automotive- and mortgage-lending practices.
The settlement follows talks with the Consumer Financial Protection Bureau and the Comptroller of the Currency’s Office that Wells Fargo Chief Executive Officer Tim Sloan disclosed earlier this month. The government penalized the lender for selling some auto borrowers insurance they didn’t need under the pretense they might not qualify for the loans otherwise, and for charging fees to mortgage customers that it was supposed to be absorbing.
“We have said all along that we will enforce the law,” acting bureau director Mick Mulvaney, an appointee of President Trump who has been criticized for scaling back his agency’s activities, said in a statement. “That is what we did here.”
Wells Fargo’s brand has been tarnished since executives conceded in late 2016 that 5,000 workers had been fired over a five-year period for creating more than 3 million unauthorized customer accounts in order to meet ambitious sales targets.
The initial $185 million settlement cost the bank lucrative bond deals with government agencies, led to contentious congressional hearings and spurred the abrupt retirement of then-Chairman and CEO John Stumpf. The subsequent auto and mortgage probes only exacerbated regulators’ concerns.
Earlier this year, the Federal Reserve imposed a cap on Wells Fargo’s growth until it improves corporate oversight, a move that Sloan has said will curb the lender’s profit by as much as $400 million.
The directive requires the San Francisco-based lender to keep its assets at or below the roughly $2 trillion held at the end of December 2017. At that time, it was the nation’s third-largest bank, behind New York-based JPMorgan Chase and Charlotte, N.C.-based Bank of America.
“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,” Sloan said in a statement. “While we have more work to do, these orders affirm that we share the same priorities with our regulators.”
Wells Fargo climbed 2.2 percent to $52.69 in New York trading on Friday, paring its losses this year to 13 percent. The bank continues struggling to distance itself from past scandals, Brian Kleinhanzl, an analyst with Keefe, Bruyette & Woods, said earlier this week, and will likely trade at a discount to its peers until it’s clearer that “the company has not permanently damaged the franchise.”
Some lawmakers remain unconvinced the bank has sufficiently paid for past misdeeds, or that the consumer bureau under Mulvaney’s leadership is living up to its responsibilities.
“Wells Fargo has a terrible track record of harming consumers and deserves every punishment they have received and more,” said Rep. Maxine Waters, the highest-ranking Democrat on the House Financial Services Committee.
While berating Mulvaney for “working to undermine the consumer bureau from the inside,” she argued that fines are insufficient to address Wells Fargo’s improprieties.
“This action still does not put the bank’s past behavior to rest,” she said. “Steeper penalties are still necessary.”
