Consumers have received or will soon get $2 billion of Wells Fargo’s $3.7 billion settlement with the Consumer Financial Protection Bureau (CFPB).
The watchdog agency negotiated the settlement with the bank, resolving years of customer abuses that CFPB says harmed 16 million people. According to the agency, the bank repeatedly misapplied loan payments, wrongfully foreclosed on homes, illegally repossessed vehicles, incorrectly assessed fees and interest and charged surprise 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.”
Many consumers have already received compensation. Wells Fargo has paid $1.3 billion to 11 million customers who had auto-loan servicing issues. The government’s complaint says the bank incorrectly applied borrowers’ payments, improperly charged fees and interest, and wrongfully repossessed borrowers’ vehicles.
In addition, the bank failed to ensure that borrowers received a refund for certain fees on add-on products when an auto loan ended early.
“Victims of illegal auto repossession suffer devastating losses and have almost no leverage to seek justice on their own,” said Erin Witte, director of consumer protection at the Consumer Federation of America. “This is a powerful reminder that we need the CFPB to stand up for the millions of people who would have no other recourse.”
The settlement also resolves charges that Wells Fargo improperly denied mortgage modifications, illegally charged surprise overdraft fees, unlawfully froze consumer accounts and mispresented fee waivers. The bank froze more than 1 million consumer accounts based on a faulty automated filter’s determination that there may have been a fraudulent deposit, even when it could have taken other actions that would have not harmed customers.
In addition to the $1.3 billion already distributed to auto loan customers, Wells Fargo will be required to pay more than $500 million in consumer redress for affected deposit accounts, including $205 million for illegal surprise overdraft fees. It will also pay nearly $200 million in consumer refunds for affected mortgage customers.
This isn’t the first time Wells Fargo has been forced by government regulators to write a big check. In September 2016, Wells Fargo revealed that employees had opened checking and credit card accounts without customers’ knowledge or permission. The company was charged with pressuring employees to meet unrealistic sales goals, leading to millions of unauthorized accounts.
To resolve that complaint Wells Fargo paid $3 billion in early 2020 to resolve civil and criminal charges.