More than three years after the scandal was first revealed, Wells Fargo has agreed to pay $3 billion to resolve civil and criminal charges stemming from the opening of millions of bogus checking and credit card accounts.
In September 2016, Wells Fargo revealed that employees had opened the accounts without customers’ knowledge or permission. The company was charged with pressuring employees to meet unrealistic sales goals, leading to millions of unauthorized accounts.
After revealing that action, the bank fired thousands of employees and hired a third-party investigative team which determined that there may have been as many as 3.5 million unauthorized accounts, 1.4 million more than originally reported.
Millions of dollars in fees and interest
In agreeing to settle charges with U.S. attorneys, Wells Fargo admitted that it collected millions of dollars in fees and interest generated by the unauthorized accounts. It further said that it harmed the credit ratings of many customers and unlawfully misused customers’ sensitive personal information, including customers’ means of identification.
“When companies cheat to compete, they harm customers and other competitors,” said Deputy Assistant Attorney General Michael Granston of the Department of Justice’s Civil Division. “This settlement holds Wells Fargo accountable for tolerating fraudulent conduct that is remarkable both for its duration and scope and for its blatant disregard of customer’s private information.”
This is the largest fine Wells Fargo has faced, but it had previously been assessed for millions of dollars for other alleged transgressions against consumers, including $97 million to compensate California workers.
In 2018, Wells Fargo agreed to a $2 billion settlement over charges of selling mortgages it knew were based on inaccurate income information. The bank did not admit liability in making that settlement.
The terms
Under the terms of the settlement, Wells Fargo won’t be prosecuted during a three-year period as long as the bank abides by certain conditions, including continuing to cooperate with further government investigations.
The civil agreement was reached under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). Federal officials say Wells Fargo ran afoul of that regulation when it created false bank records.
The settlement also includes an agreement with a Securities and Exchange Commission (SEC) cease-and-desist proceeding, which found violations of Section 10(b) and Rule 10b-5 of the Exchange Act. The $3 billion payment resolves all three matters and includes a $500 million civil penalty to be distributed by the SEC to investors.
The Justice Department says by agreeing to the settlement, Wells Fargo has acknowledged that it began a cross-sell strategy in 1998 that emphasized a policy to sell existing customers additional financial products. That, the government charged, led employees to invent sales in order to meet those objectives.