$1B fine

Wells Fargo slammed with $1B fine

By KATY O'DONNELL

Federal regulators slapped Wells Fargo with a $1 billion fine on Friday over customer abuses in its auto-lending and mortgage businesses, the latest in a series of blows to the troubled San Francisco-based bank.

The fine, levied by the Office of the Comptroller of the Currency and the CFPB, marks the biggest enforcement action the Trump administration has taken against a bank and dwarfs previous penalties by the two agencies. It is also the first significant CFPB action since Mick Mulvaney took over as acting director in November.

"We have said all along that we will enforce the law," Mulvaney said in a statement. "That is what we did here."

The CFPB and the OCC each fined Wells Fargo $500 million. The CFPB ordered the bank to wire the money within 10 days of the effective date of the settlement.

Wells Fargo, the third-largest U.S. bank, disclosed in July that it had charged hundreds of thousands of customers for auto insurance they didn’t need. And it said in October it would refund homebuyers who were improperly charged fees to secure low mortgage rates.

As part of the settlement, the regulators ordered the bank to submit a compliance risk management plan within 60 days that includes “detailed steps to develop, implement and maintain policies and procedures that ensure oversight and commitment to an effective compliance management system.”

The CFPB’s largest previous penalty was $100 million in 2016, also against Wells Fargo — part of a $185 million enforcement action by the bureau, the OCC and the Office of Los Angeles City Attorney over the bank’s fake accounts scandal. The OCC’s portion of the fine Friday matches its highest previous fine, $500 million levied against HSBC in 2012.

A memo from the CFPB’s enforcement office released in September indicated the agency could have fined Wells Fargo some $10 billion for opening potentially millions of fraudulent customer accounts to meet sales quotas. The accounts debacle forced the ouster of CEO John Stumpf, shortly after he delivered widely panned testimony to Congress on the matter.

President Donald Trump weighed in on the scandals surrounding Wells Fargo in December, with a tweet pledging that fines against the company would “be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!” Trump wrote.

The tweet added to concerns about Mulvaney’s independence; critics fretted about the possibility the new acting director, who continues to serve as head of the White House Office of Management and Budget, could be taking enforcement directions from the president.

Fallout from the accounts scandal and other customer abuses, meanwhile, continued. It prompted unprecedented action by the Federal Reserve, which announced in February that it would bar Wells Fargo from growing any larger than it had been at the end of 2017 unless it implemented “robust and comprehensive reforms” to its governance and risk-management structures. The bank planned to replace three board members by April and a fourth by the end of the year.

The bank, which reported net income of $5.9 billion for the first quarter of the year, disclosed in an earnings call last week that the agencies had offered to settle their civil investigations for $1 billion. Its annual shareholder meeting is next week.

“We’ve certainly had a thorough look in every nook and cranny in the company, and we’re continuing on that process,” CEO Tim Sloan said on the call. “One of the lessons learned for us, candidly, over the last few years is that we should have been doing a better job of that when we were performing quite well in the prior years.

“And we are not going to make that mistake again, so we are going to continue to raise the bar on ourselves over time,” he added. “But in terms of declaring victory and walking away, we are not at that spot right now.”