Wells Fargo News

Last month, Wells Fargo admitted in an SEC filing that it wrongly denied mortgage modifications to 870 eligible borrowers, resulting in 545 people losing their homes in foreclosure proceedings.

The company said at the time that it would set aside some money to compensate the victims, though how much exactly wasn't made clear.

Now, it appears that Wells Fargo is pinning the amount at about $25,000, according to one of the victims who is now going public with his story.

That doesn’t begin to cover actual losses, an attorney for former homeowner Jose Aguilar told CBS News.

Denied loan modification

Aguilar lived in a house with his wife and children in upstate New York, not far from the manufacturing plant where he worked. Problems for the family’s living situation began when they found mold in the house and couldn't afford to pay for both the repairs and their monthly mortgage.

The family applied for a mortgage modification, and Aguilar says Wells Fargo suggested he might qualify.

Aguilar then waited for an official answer from Wells Fargo amid delays. It took over a year before the bank responded with instructions to apply for the modification once more.

When he did, the bank denied the application. Since he had already fallen behind on payments over the past year, the foreclosure proceedings began.  

The family lost their home in October 2015, and Aguilar's wife left him as a result, he told ABC.  

Then Wells Fargo sent Aguilar a letter earlier this year, explaining that the loan modification should have been approved. The bank also gave him a $25,000 check for his troubles.

"Wells Fargo has not been transparent at all about how this happened," Aguilar’s lawyer added.

Aguilar now lives in a friend’s basement with his son because the foreclosure ruined his credit, making it impossible to secure a rental.

Wells Fargo still hasn't completely put its bad news behind it. The bank has acknowledged that it didn't offer mortgage modifications to hundreds more borrowers who could have qualified for them. Many of those customers eventually lost their homes to foreclosure.

The bank thought it had put the issue to rest in August when it revealed that it miscalculated fees in its formula to determine whether borrowers were eligible for mortgage modifications. At the time, it determined that it wrongly denied modifications to more than 600 mortgage customers and that 400 of them eventually saw their homes go into foreclosure.

In a filing with the Securities and Exchange Commission this week, Wells Fargo admitted that an additional 870 mortgage customers were wrongly denied modifications for the same reason. As a result, it said 545 borrowers eventually lost their homes -- more than the number in the initial revelation.

Wells Fargo said the discrepancy is due to the fact that it initially reviewed homes in the foreclosure process between April 2010 and October 2015. The higher numbers resulted from extending the review period.

Affected consumers to be compensated

The bank has said that it has set aside money to compensate those customers who were wrongly denied mortgage modifications, but it is unclear so far how it will be done.

“Our plan is to work with each customer to arrive at a resolution that addresses their particular situation,” a Wells Fargo spokesman said in a statement to the Los Angeles Times. “Every customer situation is different. As a result, we don’t have any details on the amount we expect to pay out in remediation.”

Wells Fargo's troubles began in late 2016 when it reported that employees had opened millions of checking and credit card accounts for customers without their permission or knowledge. As a result, the CEO took early retirement and 5,000 bank employees were fired. Wells Fargo also paid a large fine.

Since then Wells Fargo has revealed that it sold thousands of insurance policies to auto loan customers who didn't need the coverage. It also reported that it accessed improper fees on some mortgage loans.

Sen. Elizabeth Warren (D-Mass.), a harsh critic of Wells Fargo from the earliest days of the unauthorized accounts scandal, is pressing for continued sanctions against the bank.

Warren has sent a letter to Federal Reserve Board Chairman Jerome Powell urging him to maintain the Fed's punitive growth restrictions on Wells Fargo until the bank replaces CEO John Sloan with, in the senator's words, “someone who is not deeply implicated in the bank's misconduct.”

Sloan served as Wells Fargo's chief operating officer (COO) before being elevated to CEO, replacing John Stumpf, who took early retirement following the 2016 revelation that Wells Fargo employees had opened millions of checking and credit card accounts without customers' knowledge or consent.

In response the Fed placed restrictions on the bank, including limits to how quickly, and to what extent it could grow.

Follows bank’s positive earnings report

Warren's letter follows last week's third quarter earnings report, showing Wells Fargo earned more revenue than expected during the period, even as its bottom line came in slightly softer than expected. On a conference call with analysts last week, Sloan said the results reflect the positive changes the bank has been making.

The Fed issued an order in February telling Wells Fargo it would not be permitted to get any larger until it improved its internal controls. In her letter to Chairman Powell, Warner argued those changes will not happen until there is a change at the top.

Bank confident it’s meeting requirements

In a statement to the media, Wells Fargo said it continues to have a “constructive dialog” with the Fed and is working to satisfy its obligations under the consent order. A spokesman said the bank is confident that it is meeting its requirements.

"Mr. Sloan's long track record at the bank demonstrates little ability to 'effectively manage the firm's activities' - and should give the Federal Reserve little confidence that he can help transform the bank's culture and operations as the Cease and Desist Order requires," Warren wrote in her letter.

"To effectively enforce the requirements in the February 2, 2018 Cease and Desist order, the Federal Reserve should not remove the growth cap on WFC until the Board replaces Mr. Sloan with a new CEO who has not contributed to the very problems the Federal Reserve is seeking to fix," the letter continued.

In the wake of the 2016 scandal Warren not only pushed for the removal of Stumpf as CEO but also urged the Fed to remove 12 members of the bank's board of directors. She renewed that call in July 2017 when it was revealed as many as 800,000 auto loan customers were sold insurance they didn't need.

Wells Fargo is trimming its ranks as it adapts to the new banking environment in which consumers are performing many traditional banking services for themselves with digital tools.

The bank has announced plans to reduce its workforce by up to 10 percent in the next three years, eliminating as many as 26,000 jobs. The force reduction will be achieved through layoffs and attrition.

Company CEO Tim Sloan said the move is designed to making the bank more “customer-focused,” streamlined, and in a better position to achieve long-term success.

“We are continuing to transform Wells Fargo to deliver what customers want – including innovative, customer-friendly products and services – and evolving our business model to meet those needs in a more streamlined and efficient manner,” Sloan said

Keeping up with customer preferences

The CEO said Wells Fargo is simply keeping up with customer preferences, including the demand for more digital self-service capabilities, a trend that is growing throughout the banking industry. Mobile banking tools, allowing customers to deposit checks using their phones, is reducing the need for physical locations, as well as people to staff them.

Wells Fargo is only two years removed from a major scandal that resulted in the firing of 5,000 employees and the early retirement of its CEO. In 2016 the bank revealed that employees had opened millions of checking and credit card accounts in customers' names without their knowledge.

That was followed by revelations the bank had sold auto loan customers insurance coverage they didn't need and had wrongly foreclosed on as many as 400 homeowners. The bank has paid well over $3 billion in fines and settlements since 2016. It has also had to fend off a number of class-action lawsuits.

Two years of progress

Sloan says the bank has made progress over the last two years to improve customer service and efficiency. These efforts have been reflected in its recent advertising campaign, noting the company has a long history but effectively became a new bank, with a new commitment to customers, in 2018.

“We are addressing past issues, enhancing our focus on customers, strengthening risk management and controls, simplifying our organization, and improving the team member experience – all in the spirit of building a better Wells Fargo for our customers,” Sloan said.

Wells Fargo is reportedly considering bolstering its shrinking student lending business by offering loans that let customers retire their government-backed student debt, Bloomberg reports.

Wells Fargo wants to extend its current offerings to include federal student loan refinancing. Previously, the bank offered only private student loan consolidation, in which a borrower with multiple Wells Fargo private student loans could consolidate them into a single loan or refinance any one of them.

“We continue to assess the needs of our customers on refinancing of federal loans into private,” Well Fargo’s Head of Personal Lending John Rasmussen told Bloomberg. “We’re sizing what that should look like, how we’d do that in a real customer-focused way.”

Building relationships with students

The move would help boost the lender’s student-loan portfolio, which was down to $11.5 billion at the end of June from $12.2 billion last year. Rasmussen cited numerous consumer scandals and accelerated loan repayments due to an improving economy as reasons for the smaller portfolio.

Although no final decision has been made yet, refinancing federal student loans could help Wells Fargo attract more college-aged consumers as customers and improve its reputation.

Earlier this month, Wells Fargo admitted to having wrongly foreclosed on hundreds of homes in the period between April 2010 and October 2015 due to a computing error caused by a mortgage underwriting tool. The bank said it put aside $8 million to repay the affected customers.

For Wells Fargo, the bank that has been slapped with well over $3 billion in fines since 2016, the hits just keep on coming.

In a quarterly filing with the Securities and Exchange Commission (SEC), the bank revealed its purchase of low income housing credits is now the focus of a federal investigation.

The bank also concedes that, because of a computer error, it may have foreclosed on as many as 400 homes.

Wells Fargo said its internal review found that 625 of its mortgage customers were denied mortgage modifications, even though they qualified for the program. The bank reports that 400 of those mortgage customers ultimately lost their homes.

The error occurred in the formula used to calculate attorney fees, which changed between 2010 and 2015. Because of the error, some customers were wrongly denied a chance for a modification. Wells Fargo said it has set aside $8 million to compensate those customers and settle with government agencies.

For Wells Fargo, it has been a turbulent two years, with a string of missteps and mistakes that have tarnished the bank's reputation. In its most recent advertising campaign, the company acknowledges its mistakes (see video below) and has sought a reset with the tag line, "Established 1852. Re-established 2018."

Bad news needs to end

Of course, for that to be effective, the bad news has to end.

In the last two years, Wells Fargo has:

• Paid $185 million to settle charges it opened checking and credit card accounts for millions of customers without their knowledge

• Paid $4 million to settle charges of improper trading

• Paid $1 billion for policies that harmed mortgage and auto loan customers

• Paid $2 billion to settle charges of misrepresenting the value of its mortgages

In February, the Federal Reserve warned Wells Fargo that the bank's board of directors must exercise better oversight of the company's senior management, and that the bank's performance would be closely monitored by regulators.

In the wake of the 2008 financial crisis, the Justice Department accused Wells Fargo, among other institutions, of selling mortgages it knew were based on inaccurate income information.

The bank has agreed to settle those charges, without admitting liability, and pay a $2 billion fine.

The investigation of Wells Fargo began soon after the near-collapse of the financial system, when a wave of home foreclosures destroyed the value of mortgage-backed securities. In many cases the bad loans turned out to be subprime mortgages, granted to borrowers who couldn't really afford them.

In the case of Wells Fargo, government investigators alleged the bank issued mortgages to consumers it knew had provided inaccurate information about their income, then sold those mortgages in the securities market.

The collapse of the mortgage-backed securities market was partially responsible for the bankruptcy of Lehman Brothers in September 2008, which began the financial crisis and turned a garden variety recession into the Great Recession.

Major repercussions

"Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans," said Alex G. Tse, acting U.S. Attorney for the Northern District of California.

Tse says the settlement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted. Wells Fargo, however, agreed to the settlement without admitting it did anything wrong.

“We are pleased to put behind us these legacy issues regarding claims related to residential mortgage-backed securities activities that occurred more than a decade ago,” said Wells Fargo CEO Tim Sloan.

'Unacceptable discrepancies'

According to the Justice Department, Wells Fargo's own internal comparisons of loan applicant income statements and their actual tax returns filed with the IRS showed 70 percent had "unacceptable" discrepancies in stated income.

Wells Fargo has been writing plenty of checks to the government in recent years to wrap up issues unrelated to this week's mortgage-backed securities settlement. It paid more than $185 million in 2016 to settle charges that it opened checking and credit card accounts for millions of customers without their knowledge.

In April of this year, it paid $1 billion in connection with its sale of products connected to car loans and mortgages.

In June, it agreed to a settlement with the Securities and Exchange Commission (SEC), resolving charges that its advisors unit engaged in misconduct in the sale of financial products, known as market-linked investments (MLI), to small investors.

More Wells Fargo customers may be in line for refunds.

The bank, which was hit with huge fines in 2016 after it opened checking and credit card accounts for customers without their knowledge, has spent the last three years auditing the bank's marketing of add-on services.

The investigation has centered around credit monitoring and identity theft protection services some customers said they paid for but never received.

The Wall Street Journal, citing sources familiar with the issue, reports many customers who paid for pet insurance and other add-on services will receive tens of millions of dollars in refunds.

The matter is reportedly under investigation by the Consumer Financial Protection Bureau (CFPB), which is trying to determine whether customers were deceived or knew how to cancel the products, for which they paid a monthly fee.

Under review

Wells Fargo told The Journal it is still “reviewing add-on products sold to consumers by the bank or its service providers and if issues are found during this review, we will make things right with customers in the form of refunds or remediation.”

A bank spokeswoman told the newspaper the bank is cooperating with regulators in an ongoing review.

This is just the latest challenge for Wells Fargo, which in 2016 was slapped with a $185 million fine from federal and state regulators for the unauthorized checking and credit card accounts, opened for 3.5 million unsuspecting customers.

The following year it was revealed that some Wells Fargo customers unknowingly purchased auto insurance they didn't need. The bank said the additional costs may have led to 20,000 defaults and car repossessions.

Financial advisors under scrutiny

Earlier this year, a whistleblower charged that the bank's financial advisor unit often made decisions with an eye toward compensation rather than what was best for the client.

Last month, Wells Fargo agreed to a settlement with the Securities and Exchange Commission (SEC), resolving charges that its advisers unit engaged in misconduct in the sale of financial products, known as market-linked investments (MLI), to small investors.

According to the SEC, the bank was able to charge huge fees by encouraging its retail customers to actively trade the products, even though they are designed to be held until they mature.

The SEC found that from 2009 to 2013, Wells Fargo Advisors improperly encouraged investors to sell MLIs before maturity, then invest the money in new MLIs. The bank assessed substantial fees on each transaction.

Wells Fargo has agreed to a settlement with the Securities and Exchange Commission (SEC), resolving charges that its advisors unit engaged in misconduct in the sale of financial products, known as market-linked investments (MLI), to small investors.

The SEC said its investigation found that the bank was able to charge large fees by encouraging its retail customers to actively trade the products, even though they are designed to be held until they mature.

The SEC said that from 2009 to 2013, Wells Fargo Advisors improperly encouraged investors to sell MLIs before maturity, then invest the money in new MLIs. The bank assessed substantial fees on each transaction.

$4 million penalty

The bank agreed to pay a $4 million penalty and return money to investors. In a statement, Wells Fargo said it cooperated with the SEC investigation.

The SEC said the improper activity took place despite bank policies that prohibited it. Investigators point to rules in place barring clients from engaging in short-term trading or "flipping" of assets, but they note that Wells Fargo supervisors routinely signed off on these transactions.

“It is important that brokers do their homework before they recommend that their retail customers buy or sell complex structured products,” said Daniel Michael, Chief of the Enforcement Division’s Complex Financial Instruments Unit. “The products sold by Wells Fargo came with high fees and commissions, which Wells Fargo should have taken into account before advising retail customers to sell their investments and reinvest the proceeds in similar products.”

Past transgressions

This is far from the first time that Wells Fargo has run afoul of financial regulators. In September 2016, bank officials revealed that employees had opened checking and credit card accounts for millions of Wells Fargo customers without their knowledge or permission. The scandal ultimately resulted in a $185 million fine and dozens of lawsuits.

In the last year, Wells Fargo has been under investigation by regulators and faced lawsuits for the way it conducted its auto loan and mortgages businesses. Last year, the bank faced a class action lawsuit by plaintiffs who said they were charged extra fees when their mortgage applications were denied, even when the denial was due to a bank error.

The case revolved around rate-lock extension fees -- the fees borrowers pay to "lock in" an interest rate for a specific period of time, usually 30 to 45 days. If it takes longer than that for the loan to be approved, the borrower is charged an extra fee.

Also in 2017, Wells Fargo revealed that 570,000 consumers who financed auto purchases through the bank may have been sold a collateral protection insurance (CPI) without their knowledge or consent.

Late Tuesday, a federal judge ordered Wells Fargo to pay over $97 million to California mortgage workers who weren’t paid enough for their breaks. The damages, which come after a January ruling that found Wells Fargo in violation of California’s strict labor laws, are nearly four times what the company argued it should owe.

The ruling applies to those workers - both mortgage consultants and bankers - who worked in California between March 2013 and August 2017.

“Finally, I feel like justice has been served,” said Jackie Ibarra, a former Wells Fargo employee and the suit’s lead plaintiff. “It’s unfair not to pay us properly when we’re essentially working on commission.” Ibarra worked for Wells Fargo for 10 years.

However, the company isn’t going down without a fight. Bank representatives say Wells Fargo plans to appeal the ruling.

“We disagree and believe the court misunderstood our compensation plan and misunderstood the law,” a Wells Fargo spokesperson said.

Violating the law

The main accusation in the case involves the company’s inability to properly compensate employees for their break time.

California law mandates that employees must have a 10-minute paid break for every four hours they’re on the clock, and U.S. District Judge Percy Anderson found Wells Fargo in violation of that regulation.

While Wells Fargo tried to knock the settlement down to around $24 million -- the hourly rate the employees would be owed for their time on break -- the judge sided with the employees. Judge Anderson said the employees’ break pay should also factor in their commissions, which are rather a significant portion of their income, and noted that the commissions make the hourly wages “essentially irrelevant.”

Another big blow

This hefty settlement is one of many hits Wells Fargo has taken as of late. Over the last year and a half alone, the company has been accused of creating over three million fake accounts for customers, charging customers for unnecessary car insurance, and hitting customers with unfair mortgage fees.

This also isn’t the first time Wells Fargo has been accused of mistreating employees. There have been reports of employees being forced to work overtime without pay. Others were fired after reporting misconduct on the company’s ethics hotline.

In April, the Department of Labor (DOL) forced the bank to rehire a known whistleblower -- who was fired in 2010 after suspected fraud -- and forced the company to pay him $5.4 million in back pay. In late April, the company was the subject of a government probe following mistreatment of 401(k) retirement accounts.

Just last week, Wells Fargo reported being under fire with the DOL again after facing both complaints and whistleblower actions. The company cites “adverse employment actions” for raising “misconduct issues,” and the DOL will be opening an investigation.

Facing scrutiny from lawmakers

Following the fake-account scandal, Senator Elizabeth Warren, a staunch critic of Wells Fargo, took to Twitter to urge the company to rethink its internal personnel.

“The federal reserve should remove every Wells Fargo board member who served during this scandal. I don’t know what they’re waiting for,” Warren tweeted.

This most recent court ruling comes on the heels of Wells Fargo’s latest attempt to restore faith in their customers and stakeholders with a marketing campaign entitled “Re-Established.”

“Re-Established means recommitting to our customers and team members, reaffirming support of our communities and reinventing how we serve our customers through every interaction in new and improved ways,” said Jamie Moldafsky, Wells Fargo’s chief marketing officer. “It is about holding ourselves to a higher standard and our unwavering commitment to become a better bank.”

Wells Fargo may be the subject of a government probe of how the bank handles 401(k) retirement accounts.

If so, it would follow revelations that the bank signed up millions of customers to accounts without their permission and sold unneeded car insurance to auto loan customers.

The Wall Street Journal reports the U.S. Labor Department is investigating Wells Fargo to determine whether it pushed retirement plan enrollees into more expensive plans. The article maintains that Wells Fargo guided enrollees into funds that the bank managed in a bid to increase its profits.

10-k filing

When asked for comment, Wells Fargo referred the media to its last quarterly Securities and Exchanges Commission 10-k filing, in which it is required to disclose all material factors, including any federal investigations. In a statement to the media, the bank said the 10-k statement reflects its commitment to transparency, even when all details are not yet known.

“We are making significant progress in our work to identify and fix any issues, make things right, and build a better, stronger company," the bank said in a statement.

The 10-k filing does, in fact, make references to a review of its wealth and management business – a response to government inquiries.

Previous issues

In 2016, Wells Fargo faced a tempest when it revealed that employees had opened millions of checking and credit card accounts for customers without their knowledge or consent. The bank made a number of policy changes, including the way it provided performance incentives to employees.

A year later, the bank revealed that it had sold insurance to some auto loan customers without their knowledge. The action reportedly pushed some borrowers into default. The banks also admitted to charging some improper mortgage fees.

Wells Fargo paid a $110 million fine to settle the unauthorized accounts scandal. Published reports suggest it could face a much bigger fine for alleged auto loan and mortgage improprieties.

The nation’s largest teachers union has cut ties with Wells Fargo over the bank’s financial relationship with gunmakers and the National Rifle Association (NRA).

The American Federation of Teachers (AFT) removed the bank from its list of recommended mortgage lenders after attempts to meet with Wells Fargo executives to discuss the matter were met with silence, according to a letter released Thursday.

"Despite our several attempts, by phone and email, to schedule such a meeting, your office's response has been radio silence," AFT President Randi Weingarten said in the letter to Wells Fargo Chief Executive Officer Tim Sloan.

Connection to the NRA

The teachers union had previously requested that Wells Fargo cut lending ties with or impose new restrictions on firearms business partners following the mass shooting that killed 17 people at Marjory Stoneman Douglas High School in Parkland, Fla.

The AFT’s decision to drop the bank came after multiple attempts to engage in a conversation about gun violence with CEO Tim Sloan went unanswered.

“We can only assume that, in light of your silence and the NRA attacks, you have decided that the NRA business is more valuable to you than students and their educators are,” the letter stated.

The AFT has 1.7 million members and channels about 20,000 mortgages to Wells Fargo through its benefit program. The union said it will stop offering mortgages from the bank unless it ends its relationship with the gun business.

Wells Fargo responds

Wells Fargo said it wants schools to be safe, but that elected officials -- not banks -- should decide which products Americans can buy. It added that safety issues should be decided by lawmakers.

Other banks have taken a different stance. Bank of America, Chase, Citigroup, and others have limited their business dealings with gunmakers in light of recent events.

Weingarten said that the AFT has a responsibility to its members and their students who face potential gun violence every day.

“Gun violence is a public health epidemic, and in order to help stop it, we’ll stop the flow of resources to the companies that manufacture these weapons that have caused so much civilian carnage and death,” Weingarten said.

Wells Fargo could face record fines for past financial abuses, according to a published report.

Rueters quotes three sources close to the situation that say the Consumer Financial Protection Bureau (CFPB) is working with the Office of the Comptroller of the Currency (OCC) to levy fines against the bank for abusive actions in the administration of auto insurance and mortgages.

The bank has already paid a huge fine to settle 2016 charges that it enrolled millions of customers in checking and credit card accounts without their knowledge or permission.

According to Reuters, CFPB acting director Mick Mulvaney is considering fines that would approach one billion dollars, making it a record sanction.

Different approach for Mulvaney

It would be the first major CFPB enforcement action under Mulvaney, who has come under criticism from consumer advocates for his approach to policing the financial services industry. Mulvaney has repeatedly criticized the agency he heads, saying it is unaccountable and has too much power. As a member of Congress, he voted to abolish it, calling it a "sick, sad, joke."

The difference in Mulvaney's interest in the Wells Fargo case may be his boss. President Trump has taken to Twitter on several occasions to criticize Wells Fargo for its sales practices.

"Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased," Trump tweeted on December 8. "I will cut Regs but make penalties severe when caught cheating!"

Extra mortgage fees

Last September, plaintiffs filed a class action suit against the bank, claiming it bilked home loan borrowers by charging them extra fees when their applications were denied, even when a bank error caused the denial.

The case revolved around rate-lock extension fees -- the fees borrowers pay to "lock in" an interest rate for a specific period of time, usually 30 to 45 days. If it takes longer than that for the loan to be approved, the borrower was charged an extra fee.

A couple of months before that suit, it was revealed more than a half million consumers who financed auto purchases through Wells Fargo may have been sold a collateral protection insurance (CPI) policy without their knowledge or consent.

All auto lenders require borrowers to maintain adequate insurance on the financed vehicle to ensure the lender is repaid if the vehicle is stolen or damaged in a crash. Wells Fargo says its lending agreement allowed it to buy a CPI policy from a vendor on the customer’s behalf if there was no evidence — either from the customer or the insurance company — that the customer already had the required insurance. Wells Fargo says it discontinued the practice in 2016.

Reuters reports all of the parties involved in its report -- Wells Fargo, the CFPB, and the OCC -- declined to comment on the report.

Wells Fargo may not be out of the regulatory woods just yet.

Whistleblowers within the bank's Wealth Advisory Division, called Wells Fargo Advisors, reportedly told regulators about concerns over product and service sales. It follows 2016's unauthorized accounts scandal.

The Wall Street Journal cites bank insiders in its report, who told the newspaper that the division often made decisions with an eye toward compensation rather than what was best for the client.

The Justice Department has requested that Wells Fargo conduct an independent probe into the charges the whistleblowers laid out, and the bank has reportedly retained a law firm to conduct that investigation.

Unauthorized accounts

This isn't Wells Fargo's first brush with potential impropriety. In 2016, the bank revealed that its employees had opened millions of credit card and checking accounts without customers' knowledge or permission.

Wells Fargo, who fired more than 5,000 employees and sent its CEO into early retirement, was accused of encouraging employees to take the unauthorized action by increasing pressure to meet sales goals.

The bank agreed to pay $100 million in fines to settle the charges and another $110 million to settle a class action lawsuit.

Unauthorized auto insurance

Wells Fargo revealed last year that approximately 570,000 consumers who financed auto purchases through the bank may have been sold a collateral protection insurance (CPI) without their knowledge or consent.

Wells Fargo promised those customers would receive refunds “and other payments” as compensation. The bank estimated total remediation would be in the neighborhood of $80 million.

All auto lenders require borrowers to maintain adequate insurance on financed vehicles to ensure the lender is repaid if the vehicle is stolen or damaged in a crash.

Wells Fargo says its lending agreement allows it to buy a CPI policy from a vendor on the customer’s behalf if there was no evidence — either from the customer or the insurance company — that the customer already had the required insurance. Wells Fargo says it discontinued the practice in 2016.

The third party probe of Wells Fargo's Wealth Advisory Division touches on an issue that become a focus of attention in the regulation of the brokerage industry -- whether recommendations sometimes benefit the broker more than the client.

Under the Obama Administration, the Department of Labor drafted a Fiduciary Rule that required financial advisors to always place clients' financial interests above their own. Under the Trump Administration, many of the enforceable provisions of the rule have been postponed until next year.

Besides the blowback from the revelation that another 1.4 million customers may have fallen into the bogus account trap, Wells Fargo is now facing a class action lawsuit that says it bilked home loan borrowers by charging them extra fees when their applications were denied, even when the denail was because of a bank error. 

The case revolves around rate-lock extension fees -- the fees borrowers pay to "lock in" an interest rate for a specific period of time, usually 30 to 45 days. If it takes longer than that for the loan to be approved, the borrower is charged an extra fee.

The plaintiff in the suit, Las Vegas security guard Victor Muniz, alleges that he paid a $287 fee to extend his locked-in rate even though the delays in approval were caused by the bank, according to a Reuters report.

Muniz said the bank hired an appraiser who was out of the country at the time and could not complete the appraisal in the time permitted.

The suit charges that the bank's loan department was chronically understaffed and that many customers had to pay the extension fee because of delays caused by the bank's disarray.

The suit was filed by the Seattle law firm Keller Rohrbeck, the same firm that sued Wells Fargo in 2015 over the creation of bogus accounts, leading the bank to agree to a $142 million settlement. 

Next week, if you need to withdraw money from a Wells Fargo ATM, you won't need your debit card. You can use your smartphone.

The bank ran a pilot program on the technology in several areas of the country and is now ready to roll it out nationwide. To use the new system, Wells Fargo customers who have the bank's mobile app will be able to request a code that they will enter, along with their PIN.

In an interview with Reuters, Jonathan Velline, Wells Fargo's head of ATM and branch banking, said the new system enhances safeguards against fraud.

"Security certainly was a big aspect of the cardless feature and the two-step identification helps reduce the risk of fraud," Velline told the wire service.

The ATMs will still take debit cards, but Velline says the digital access prevents thieves from installing skimmers that intercept and steal data from the inserted cards.

Repairing customer relations

The new system is being introduced as Wells Fargo continues its mission to repair relations with customers in the wake of last year's unauthorized accounts scandal. The bank got a black eye when it was revealed thousands of employees had opened checking and credit card accounts for customers without their permission, in a bid to increase fees.

In Orlando this week, Wells Fargo CEO Tim Sloan hosted a company-wide town hall meeting to inform employees about efforts to win back trust.

“We’re making things right for our customers and our team members," Sloan said. "We are fixing problems, and we’re building a better bank for the future.”

New ad campaign

Employees also got a sneak peak at a new national advertising campaign with the theme “Building Better Every Day.” The advertising campaign will begin in mid-April across multiple channels.

Business Insider reports the bank has faced strong headwinds as it tries to reassure consumers, experiencing a pronounced decline in new accounts and an increase in closed accounts since the scandal broke last fall.

Citing company data, the publication notes that new checking accounts dropped 43% and new credit card accounts fell by 55% in February.

When federal regulators discovered last fall that Wells Fargo had been creating credit card and checking accounts for its customers without their permission, simply to boost its fees, regulators punished the bank with millions of dollars in fines.

But it turns out consumers have also been punishing the bank.

When Wells Fargo reported its earnings for the latest quarter and full year, it disclosed that new credit card accounts plunged 43% year-over-year and dropped 7% from the previous month.

As for bank accounts, new checking accounts plunged 40% from December 2015. However, they were up slightly from November.

But that bit of good news was overshadowed by the revelation that some current Wells Fargo checking account customers simply stopped using their accounts without closing them. Between November and December, active checking account customers fell by 100,000.

5,300 bank employees fired

Back in September, Wells Fargo reached a settlement with federal agencies and the City of Los Angeles over revelations it had opened millions of accounts without customers' knowledge or permission. In settling with government agencies, Wells Fargo announced that it had fired 5,300 employees and changed sales practices to end incentives to open new accounts.

Regulators charged that, not only was it fraudulent to move money and open accounts without a customer's permission, the customer also incurred fees in the process, costing him or her money.

In the earnings report Friday, Wells Fargo CEO Tim Sloan said the bank is working to regain the trust of consumers, employees and other key stakeholders.

“I am pleased with the progress we have made in customer remediation, the ongoing review of sales practices across the company and fulfilling our regulatory requirements for sales practices matters,” Sloan said. “As planned, we launched our new retail bank compensation program this month, which is based on building lifelong relationships with our customers.”

It should be noted that not everyone is punishing Wells Fargo. Even after reporting its earnings, which fell short of analysts' estimates, the company's stock rose on Wall Street. CNBC reported investors are looking past the bad news and are convinced the bank's profits will still rise in the future.

Wells Fargo faces dozens of lawsuits from angry customers over its fake accounts scandal, but it is reportedly seeking to push those disputes into arbitration.

Bloomberg News reports the bank has filed a motion in U.S. District Court in Salt Lake City to keep one particular lawsuit from getting to court. In the motion, Wells Fargo says customers agreed to resolve disputes out of court when they opened their accounts.

The lawsuits are the result of Wells Fargo's actions, opening millions of bank and credit card accounts in customers' names without their knowledge or permission. At the time, the bank was engaged in a sales strategy known as “cross-marketing,” where customers with one type of account were encouraged to open another type, increasing the amount of fees flowing to the bank.

Went beyond convincing

The bank offered incentives to employees who were able to convince customers with bank accounts to open credit card accounts, and vice-versa. Federal regulators charged Wells Fargo went beyond trying to convince customers to open new accounts and simply opened the accounts for them without their knowledge. The bank fired 5,300 employees and paid $185 million in fines. It's CEO, John Stumpf, after being raked over the coals by Congressional committees, took early retirement.

Bloomberg reports the motion, filed in the lawsuit brought by 80 Wells Fargo customers, points out that the arbitration clause has already been validated in another lawsuit brought in California.

Arbitration is a form of dispute resolution favored by large corporations with lots of customers. It keeps disputes out of court and, while saving in legal fees, often results in more favorable rulings. Besides banks, telecommunications companies usually require their customers to agree to arbitration.

Considering a ban

A year ago, the Consumer Financial Protection Bureau (CFPB) said it was considering proposed rules that would ban consumer financial companies from using “free pass” arbitration clauses.

With this free pass, CFPB said companies can sidestep the legal system, avoid big refunds, and continue to pursue profitable practices that may violate the law and harm countless consumers.

“Consumers should not be asked to sign away their legal rights when they open a bank account or credit card,” CFPB Director Richard Cordray said at the time.

Cordray said corporations are using the arbitration clause as a free pass to sidestep the courts and his agency would consider banning arbitration clauses that block group lawsuits.

A federal regulator has revoked its earlier position and will increase its oversight of Wells Fargo, adding to the fallout from the bank's fake accounts scandal.

The Office of Comptroller of the Currency (OCC) issued a brief statement, saying the bank must now get OCC approval for any changes to its board of directors and senior leadership. Specifically, the OCC said it must approve any senior executive severance packages, known in the business as “golden parachutes.”

In early September, Wells Fargo agreed to pay a $100 million fine for secretly opening checking and credit card accounts in customers' names without their knowledge. Federal regulators who brought the enforcement action claimed the bank did that so it could meet its sales quota for new accounts.

The Consumer Financial Protection Bureau (CFPB) said the bank employees, under pressure to meet targets and earn sales incentives, opened more than two million unauthorized deposit and credit card accounts.

Largest CFPB fine ever

“Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,” CFPB Director Richard Cordray said at the time. “Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed.”

The bank responded by firing 5,300 employees it said were responsible for the fake accounts, but lawmakers and regulators began looking more closely at the executive suite.

The heat fell squarely on Wells Fargo CEO John Stumpf, who was hauled before several Congressional committees to endure tongue lashings from a number of outraged lawmakers. Stumpf eventually announced his early retirement in an effort to quell the furor. The OCC announcement suggests the furor still has room to run.

Meanwhile, business at Wells Fargo has fallen dramatically. Fortune reported late last week that new accounting openings “fell off a cliff” in October. Checking account openings were down 44% from October 2015. New credit card accounts were down 50%. New CEO Tim Sloan said the decline in new accounts was expected.

The enormity of what Wells Fargo did to many of its customers appears to be sinking in, and anger is building.

Wells Fargo CEO John Stumph was back on Capitol Hill Thursday, facing lawmakers who, if anything, are angrier now than they were the week before when Stumph appeared before them to try to explain how thousands of bank employees opened accounts in customers' names, without their knowledge, just so the employees could hit their sales goals.

It may be too soon to know if the scandal will cause huge numbers of current Wells Fargo customers to look for another bank, but the scandal has already caused the state of California to do so.

“Wells Fargo’s fleecing of its customers by opening fraudulent accounts for the purpose of extracting millions in illegal fees demonstrates, at best, a reckless lack of institutional control and, at worst, a culture which actively promotes wanton greed,” said California Treasurer John Chiang, in a statement.

Losing California's business

Because of the bank's actions, Chaing announced the state will suspend its financial ties with the San Francisco-based financial institution. That means no investments by the Treasurer's Office in Wells Fargo securities.

It also means the state will stop using Wells Fargo brokerage services and will drop the bank as a managing underwriter on state bond sales. The sanctions will remain in place for at least 12 months.

That's likely to get Wells Fargo's attention, since the state Treasurer controls nearly $2 trillion in annual banking transactions, manages billions of dollars in investments, and is the largest issuer of municipal bonds in the U.S.

In a letter to Wells Fargo, Chaing said he is trying to help the bank understand that “integrity and trust matter.”

Warren not letting up

In Washington, the scandal seems to have united a divided Congress in its condemnation of Wells Fargo. Sen. Elizabeth Warren (D-MA) has been the most vocal and most scathing, however, particularly when she confronted Stumph at a Senate Banking Committee hearing.

“You haven’t resigned. You haven’t returned a single nickel of your personal earnings,” she said. “You haven’t fired a single senior executive. Instead, your definition of ‘accountable’ is to push the blame to your low-level employees who don’t have money for a fancy PR firm to defend themselves. It’s gutless leadership.”

Warren says the bank “squeezed employees to the breaking point” in an effort to drive up the price of its stock. Some present and former bank employees, meanwhile, have sued Wells Fargo, claiming they were the biggest victims of the scandal.

Meanwhile, Warren and seven other members of the Senate have sent a letter to the Department of Labor, requesting it investigate Wells Fargo for potential violations of wage and hour laws as it pushed employees to hit sales targets.

It hasn’t been a good month for Wells Fargo. The company found itself in the middle of a scandal after reports revealed that its employees engaged in fraudulent behavior by opening customer accounts without consent.

The actions resulted in multiple lawsuits, including $185 million in fines from federal regulators, the Office of the Comptroller, and the City and County of Los Angeles. It is also likely that the company will face a probe from the FBI and federal prosecutors.

Now, the company’s board has decided to penalize CEO John Stumpf by forcing him to forfeit $41 million from his compensation package. He will also not receive any bonuses for 2016 and will forgo his salary while the company performs its own internal investigation into the company’s banking sales practices. Carrie Tolstedt, the former head of retail banking, will also be denied $19 million.

“We are deeply concerned by these matters, and we are committed to ensuring that all aspects of the company’s business are conducted with integrity, transparency, and oversight,” said Stephen Sanger, lead independent director for the board, in a statement. “We will conduct this investigation with the diligence it deserves — and will follow the facts wherever they lead.”

The Wells Fargo board could potentially take further action against Stumpf, Tolstedt, and other executives depending on what they find. The members have stated that Stumpf will recuse himself of all board-related deliberations related to the investigation.

“We will proceed with a sense of urgency but will take the time we need to conduct a thorough investigation,” Sanger said. “We will then take all appropriate actions to reinforce the right culture and ensure that lessons are learned, misconduct is addressed, and systems and processes are improved so there can be no repetition of similar conduct.”

Lawmakers remain unsatisfied

While the actions taken by the company may seem to be a start in the right direction, lawmakers say that there is much that should be done. They point out that while 5,300 employees were fired as a result of the scandal, company executives seem to have come out pretty well.

Earlier this month, CNN reported that after Tolstedt retires at the end of the year, she will be able to rake in $124 million in shares, options, and restricted stock. Sen. Elizabeth Warren has stated her disgust that low-level employees are the ones taking the blame for the scandal.

“You haven’t resigned, you haven’t returned a single nickel of personal earnings, you haven’t fired a single senior executive,” Warren said during the Senate hearing. “Your definition of accountable is to push the blame to your low level employees… it’s gutless leadership.”

“[Wells Fargo’s] announcement is a step in the right direction but there are still dozens of unanswered questions,” added Ohio Sen. Sherrod Brown in a statement.

Wells Fargo has agreed to settle a West Virginia lawsuit that dates all the way back to 2005. The company will pay $8 million to settle allegations made against Acordia, an insurance broker that was acquired by Wells Fargo in 2001.

The suit was originally filed by then-West Virginia Attorney General Darrell McGraw; it charged Acordia with favoring certain insurance carriers over others to the detriment of consumers. The lawsuit stated consumers were directed towards choosing these carriers “regardless of whether the insurers provided the best cost, coverage and financial security for the client,” according to Business Insurance report.

Before the lawsuit was filed in 2005, the Attorney General’s office launched a probe to gather information and evidence of any wrong-doing.

According to the Charleston Gazette-Mail, investigators found that brokers and insurance companies had made arrangements for secret “contingent commissions,” wherein the insurance carriers would pay extra money to brokers in order to have clients directed towards their companies; these secret commissions allegedly earned brokers millions in extra fees.

$8 million settlement

Wells Fargo denies any wrong-doing in connection to this case, but has agreed to pay $8 million to the Office of the Attorney General on the state’s behalf.

Current West Virginia Attorney General Patrick Morrisey announced the settlement on Monday, citing it has a victory for citizens of West Virginia.

“I take very seriously my office’s obligation to protect citizens from questionable marketing practices,” he said. “This settlement is yet another example demonstrating that commitment.”

A copy of the settlement can be viewed here.

If you’ve ever called a customer service line, then you may be all too familiar with the initial spiel or automated message that you hear before talking to a human: “This call may be recorded for quality assurance purposes.”

While companies certainly do use these recordings for training purposes, the statement is also important because it provides a warning for consumers. Wells Fargo may be learning that lesson the hard way. The company has been fined $8.5 million for violating California’s state law which requires that all companies disclose that a call is being recorded.

The suit was filed back in February when the state accused Wells Fargo of violating sections 632 and 632.7 of its penal code. The lion’s share of the $8.5 million will be split up amongst five California counties, with $7.6 million going to Los Angeles, Riverside, Venture, Alameda, and San Diego. Wells Fargo will also pay $250,000 to two organizations – the Privacy Rights Clearinghouse and the Consumer Protection Prosecution Trust Fund.

Victory for consumer privacy

The state considers the suit a victory for consumer privacy, saying that it is more important than ever that consumers feel safe in an increasingly technological world.

“This settlement holds Wells Fargo accountable for violating the privacy of its customers by recording calls without providing adequate notification, and ensures that the bank makes the changes necessary to protect the privacy of its customers,” said California Attorney General Kamala Harris.

In addition to the payment, Wells Fargo has stated that it will create an internal compliance program so that calls are no longer recorded without consent. 

The city of Los Angeles has filed suit against Wells Fargo Bank, alleging that the bank's policies and high-pressure sales quotas encouraged employees to engage in “unfair, unlawful and fraudulent conduct” against customers.

L.A. Prosecutor Mike Feuer filed the suit in state court on Monday, alleging that, among other things, employees would misuse customers' confidential information, open accounts in customers' names without authorization, often failed to close those accounts when the customers demanded it, and sometimes even took money out of authorized client accounts to pay for those unauthorized fees.

“The result is that Wells Fargo has generated a virtual fee-generating machine, through which its customers are harmed, its employees take the blame, and Wells Fargo reaps the profit,” the lawsuit says.

Furthermore, “On the rare occasions when Wells Fargo did take action against its employees for unethical sales conduct, Wells Fargo further victimized its customers by failing to inform them of the breaches, refund fees they were owed, or otherwise remedy the injuries that Wells Fargo and its bankers have caused.”

Gaming

The lawsuit also claims that Wells Fargo bankers engaged in a practice known as “gaming” -- opening unauthorized accounts in customers' names, making unauthorized withdrawals from customers' authorized accounts to pay the fees on the unauthorized ones, and reporting customers to collections and/or posting “derogatory information” in the customers' credit reports.

Wells Fargo responded with a statement saying it would fight those allegations in court, and that “Wells Fargo's culture is focused on the best interests of its customers and creating a supportive, caring and ethical environment for our team members. This includes training, audits and processes that work together to support our Vision & Values and our commitment to customers receiving only the products and services they need and will benefit from.”

Yet many consumers — from all over the country, not just California — have written reviews that sound remarkably similar to some of the allegations mentioned in Feuer's lawsuit. Consider this sampling of complaints we got about Wells Fargo, just during the month of April 2015. Dan from Bozeman, Montana wrote us on April 1 to say:

Over the past several years, I have become more and more frustrated with Wells Fargo as a whole. I have kept my personal and business bank accounts with Wells Fargo and just about every month they find a way to charge some kind of fee for some random reason. Their accounts are set up with such complex sets of terms and conditions that you cannot possibly keep track of all of them. If you don't watch your accounts daily - you can be assured they will be siphoning money. The bankers will always assure you that your accounts are free.. just know that they are not.

"Misled in the beginning"

Tawnya from Alexandria, Alabama went into more detail about those fees. She visited her local Wells Fargo branch seeking “ANOTHER temporary check card since the company failed to send me the new card, although I did receive an email [assuring me] it was sent out.” While she spoke to one employee about her check-card problems, another one overheard her mention that she had an at-home business, and encouraged her to open a business savings account.

He quickly went over the benefits and had me transfer $150 from my checking on that day, explaining to me $150 must be deposited into the business savings monthly. He did not specify it had to be an automatic transfer set up for a specific date.... [the following month] I made a deposit of $150 in the Lenlock, AL branch and no worries, until I see they took out a $14 service charge from my business checking and $6 from my business savings. As I looked further, there was another $6 charge to my business savings in Feb. … Not only was I charged a $5 service fee for years to have a checking account after the Wachovia/Wells Fargo takeover, but now I am getting service fees for trying to build a business when I was mislead in the beginning by the representative ….

John from Chicago said that “Wells Fargo small business account reps gave me a personal credit card I did not ask for and charged me fees for that.”

But Octavia from New Jersey offered a view from the employees' side of the table:

.... [O]ur finances hit the toilet when my husband switched jobs and began working for Wells. The amount of stress and pressure that he had to endure to sell and open accounts was too much for him. ... My husband has since left but reiterates that it is the worst to its customers and employees alike!

Everyone denies having quotas. The police insist they don't but ask yourself how often you've gotten tickets late in the month. Telephone solicitors say they don't have quotas but how often have you been signed up for something you never heard of?

David E. Douglas says Wells Fargo Bank is up to the same shenanigans. In a lawsuit in Los Angeles County Superior Court, Douglas charges that employees of three different Wells Fargo branches opened new accounts in his name and his business' name without his knowledge.

Douglas says branch employees are under so much pressure to sign up new customers that they use the information they already have on existing customers to open phony new accounts. Douglas claims the individual defendants opened at least eight accounts in his name and forged his signature on the applications without his knowledge, Courthouse News Service reported.

Given the demands Wells Fargo makes on its employees, it "should have known that its employees and bank managers routinely use the account information, date of birth, and Social Security and taxpayer identification numbers of defendant Wells Fargo's existing bank customers to use the existing bank customers' money to open additional accounts in the existing customers' names without their knowledge or consent and by forging the signature of their existing customers without their knowledge or consent to open said additional accounts, including purported business accounts for businesses that do not exist," Douglas' suit charges.

Even after being alerted to the issue, Wells Fargo did nothing, Douglas alleges. He says in the suit that when he found out about the unauthorized accounts, he contacted a fraud investigator at the bank's Beverly Hills branch. She assured him that Wells Fargo would "conduct a thorough investigation and make him whole," but he never heard back from her or anyone else at the bank, so he was forced to sue, Douglas says in the complaint.

The Justice Department has sued Wells Fargo, the nation's largest mortgage lender, accusing it of "reckless" lending and sticking the Federal Housing Administration (FHA) with the tab for loans that went bad.

Prosecutors say they are seeking "hundreds of millions of dollars" in damages on behalf of the FHA.  The complaint, filed in New York City, alleges that for more than a decade, Wells Fargo engaged in "reckless" underwriting of government-backed loans.

“As the complaint alleges, yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance," Manhattan U.S. Attorney Preet Bharara said. "As also alleged, Wells Fargo’s bonus incentive plan – rewarding employees based on the sheer number of loans approved – was an accelerant to a fire already burning, as quality repeatedly took a back seat to quantity.

"What’s more, even after concerns were raised internally at the bank, Wells Fargo began self-reporting bad loans in a significant way, as required, only after this Office issued a subpoena last year. Now a jury will have to weigh the facts to determine the bank’s liability and the scope of the damages it must pay,” Bharara said. 

At issue are more than 100,000 FHA-backed loans. Wells Fargo said the loans met federal lending guidelines when half of them didn't, the government alleges.

“As the complaint alleges, yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance,” U.S. Attorney Preet Bharara said in a prepared statement.

The Justice Department's case is similar to those filed earlier against Citigroup, Deutsche Bank and other lenders. Deutsche Bank has agreed to pay $202 million and Citigroup is paying $290 million. A suit against Allied Home Mortgage is still pending. Bank of America has said it reached an agreement to resolve claims for FHA-insured loans made by Countrywide Mortgage.

In July, Wells Fargo paid $125 million and set up a $50 million assistance fund to settle federal allegations that it discriminated against minority borrowers.

The online video that insults the prophet Muhammad has sparked a crisis in the Middle East and isn't doing much to make life easier for banking customers in the U.S. either.

Cyber attacks blocked Wells Fargo's site in much of the country today and U.S. Bancorp and PNC are said to be next on the list.  Bank of America, Citigroup and JPMorgan Chase were all hit earlier. 

The disruptions were caused by what are known as denial of service attacks, in which massive numbers of computers hit sites simultaneously, flooding them with requests that cause the sites to either go down or operate at a crawl.

A group calling itself the Izz al-Din al-Qassam Cyber Fighters has claimed responsibility for the attacks and says they will continue until that controversial video is taken down.

The Wells Fargo site was completely unreachable for much of today, creating cries of anguish and outrage from many of its 21 million online customers.

Many customers have blamed the banks for the attacks, although experts say there is little that anyone can do to defend against massive distributed denial of service (DDOS) attacks, so called because they use thousands of computers all around the world to mount simultaneous attacks that overwhelm not just the targeted sites but, in many cases, other sites hosted within the same data centers.

Wells Fargo issued a statement apologizing for the outage. 

"We are working to quickly resolve this issue. Customers can still access their accounts through our ATMs, stores and by phone," the bank said in a statement.

The second largest fair lending settlement in Department of Justice history has been filed, resolving allegations that Wells Fargo Bank engaged in a pattern or practice of discrimination against qualified black and Hispanic borrowers in its mortgage lending from 2004 through 2009.  

The settlement provides $125 million in compensation for wholesale borrowers who were steered into subprime mortgages or who paid higher fees and rates than white borrowers because of their race or national origin. 

Wells Fargo, the largest residential home mortgage originator in the United States, will also provide $50 million in direct down payment assistance to borrowers in communities around the country where the department identified large numbers of discrimination victims and which were hard hit by the housing crisis.  

Additionally, the bank has agreed to conduct an internal review of its retail mortgage lending and will compensate African-American and Hispanic retail borrowers who were placed into subprime loans when similarly qualified white retail borrowers received prime loans.   

Compensation paid to any retail borrowers identified in the review process will be in addition to the $125 million to compensate wholesale borrowers who were victims of discrimination. 

“The department’s action makes clear that we will hold financial institutions accountable, including some of the nation’s largest, for lending discrimination,” said Deputy Attorney General James M. Cole. “An applicant’s creditworthiness, and not the color of his or her skin, should determine what loans a borrower qualifies for. 

“With today’s settlement,”, he continued, “the federal government will ensure that African-American and Hispanic borrowers who were discriminated against will be entitled to compensation and borrowers in communities hit hard by this housing crisis will have an opportunity to access homeownership.” 

The complaint 

The settlement, which is subject to court approval, was filed in the U.S. District Court for the District of Columbia in conjunction with the department’s complaint, which alleges that between 2004 and 2008, Wells Fargo discriminated by steering approximately 4,000 black and Hispanic wholesale borrowers, as well as additional retail borrowers, into subprime mortgages when non-Hispanic white borrowers with similar credit profiles received prime loans.   

All the borrowers who were allegedly discriminated against were qualified for Wells Fargo mortgage loans according to Well Fargo’s own underwriting criteria. 

The government also alleges that, between 2004 and 2009, Wells Fargo discriminated by charging approximately 30,000 black and Hispanic wholesale borrowers higher fees and rates than non-Hispanic white borrowers because of their race or national origin rather than the borrowers’ credit worthiness or other objective criteria related to borrower risk.  

“By reaching a settlement in this case, African-American and Hispanic wholesale borrowers who received subprime loans when they should have received prime loans or who paid more for their loans will get swift and meaningful relief,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.   “As one of the largest mortgage lenders in the country, Wells Fargo’s commitment to conduct an internal review of its retail lending and compensate African American and Hispanic retail borrowers who may have been improperly placed in subprime loans is significant. We will continue to work aggressively to ensure that all qualified borrowers have access to credit on an equal basis.” 

Race a factor 

The United States’ complaint alleges that black and Hispanic wholesale borrowers paid more than non-Hispanic white wholesale borrowers, not based on borrower risk, but because of their race or national origin.   Wells Fargo’s business practice allowed its loan officers and mortgage brokers to vary a loan’s interest rate and other fees from the price it set based on the borrower’s objective credit-related factors.   

This subjective and unguided pricing discretion resulted in black and Hispanic borrowers paying more. The complaint also alleges that Wells Fargo was aware the fees and interest rates it was charging discriminated against black and Hispanic borrowers, but the actions it took were insufficient and ineffective in stopping it.  

In addition, the complaint contends that, as a result of Wells Fargo’s policies and practices, qualified black and Hispanic wholesale borrowers were placed in subprime loans rather than prime loans even when similarly-qualified non-Hispanic white borrowers were placed in prime loans.   

The discriminatory placement of wholesale borrowers in subprime loans, also known as “steering,” occurred because it was the bank’s business practice to allow mortgage brokers and employees to place a loan applicant in a subprime loan even when the applicant qualified for a prime loan .   

In addition, Wells Fargo gave mortgage brokers discretion to request exceptions to the underwriting guidelines, and Wells Fargo’s employees had discretion to grant these exceptions.         

The department began its investigation into Wells Fargo’s lending practices in 2009 and received a referral in 2010 from the Office of the Comptroller of the Currency (OCC) which conducted its own parallel investigation of Wells Fargo’s lending practices in the Baltimore and Washington, D.C. metropolitan areas.  

The OCC found that there was reason to believe that Wells Fargo engaged in a pattern or practice of discrimination in these metro areas on the basis of race or color, in violation of the FHA and ECOA.

A federal class action claims Wells Fargo Bank forces borrowers to take out too much flood insurance on their homes, then takes kickbacks and commissions on the insurance it takes out on their behalf. 

The suit was filed in U.S. District Court in Pittsburgh on behalf of Desiree Morris, of Washington, Pa., who said Wells Fargo acquired a $115,000 mortgage on her home in 2009. She currently owes about $113,000.

Upon taking out the loan, Morris said she bought flood insurance in the amount of $118,000. In November 2010, the policy was renewed and the coverage was increased to $129,800, a 10% increase from her previous level.

Morris argues that the higher amount exceeds federal requirements by more than $14,000.

She notes that federal law requires that homes which, like Morris', are in a flood plain must have insurance “in an amount at least equal to the outstanding principal balance of the loan or the maximum limit of coverage ...whichever is less.”

But that was only the beginning.

The month after her insurance was increased to $129,800, Morris received a letter from Wells Fargo which claimed that her flood insurance coverage was "less than the coverage required" and claimed that she was required to have insurance that would provide the full replacement cost for her home, up to $250,000.

Wells Fargo said in the letter that if Morris did not take out more insurance, the bank would do so for her, taking out a "lender-placed policy" and charging her for it. The letter said Wells Fargo had purchased $94,000 worth of additional flood insurance on a 90-day binder and said it would bill her escrow account for the $893 cost.

The demands in the letter were "fraudulent, deceptive and misleading," Morris' suit claims and it charges that Wells Fargo was "unfairly, unjustly and unlawfully enriched by the kickbacks, commissions or other compensation."

The suit seeks class action status on behalf of anyone who had a loan or line of credit with Wells Fargo who was required to purchase flood insurance.

It charges Wells Fargo with violating the Truth in Lending Act, breaching its agreement, violating the Real Estate Settlement Procedures Act and misappropriating funds held in trust, among other allegations.

By Mark Huffman
ConsumerAffairs.com

July 9, 2010
Wells Fargo is getting out of the subprime mortgage business, announcing plants to consolidate its Consumer Finance division.

The company said it expects 638 independent consumer finance offices will be closed as a result. In closing the offices, Wells Fargo said it is "exiting the origination of non-prime portfolio mortgage loans."

Subprime loans, often offered with low "teaser" rates, were the first to go bad, triggering a wave of foreclosures and precipitating the credit crises in late 2008.

The remaining consumer and commercial loan products offered through Wells Fargo Financial will be realigned with those offered by other Wells Fargo business units and will be available through Wells Fargo's expanded network of community banking and home mortgage stores, the company said.

The consolidation is also the result of Wells Fargo's 2008 merger with Wachovia. The bank says its customers now have access to its 6,600 Wells Fargo and Wachovia community bank stores and its 2,200 Wells Fargo Home Mortgage locations, eliminating the need for a separate network of Wells Fargo Financial local offices.

Fewer than two percent of all Wells Fargo's real estate loans were originated in Wells Fargo Financial stores in the first quarter of 2010, the company said.

"Our network of U.S.-based consumer finance stores, which have historically operated as an independent sales channel from our bank operations, have served customers well for more than 100 years," said David Kvamme, president of Wells Fargo Financial, "but the economics of a separate Wells Fargo Financial channel are no longer viable, especially now that our customers have access to the largest banking and mortgage store network in the United States."

The company said the restructuring of Wells Fargo Financial will not affect the number of community banking or home mortgage stores currently in operation. Customers with existing Wells Fargo Financial consumer loans and clients of Wells Fargo Financial's commercial businesses will continue to be served without disruption.

Consolidation

FHA home loans, auto loans and credit cards previously offered by Wells Fargo Financial will be consolidated with similar products across the company and will be offered through the company's network of community banking stores, mortgage stores, phone banks and wellsfargo.com. Wells Fargo Financial's commercial businesses will be realigned with business units within Wells Fargo over the next 12 months. However, Wells Fargo will no longer originate non-prime portfolio real estate loans.

Wells Fargo said it will also eliminate approximately 2,800 positions during the next 60 days, and 1,000 positions will likely be eliminated during the next 12 months.

Nearly a year after purchasing Wachovia, Wells Fargo may be prepared to consolidate the operations of the two banks.

The Los Angeles Times reports Wells Fargo will close 122 branches in California, as part of that consolidation. The paper quotes a bank official as saying that it will mostly be current Wachovia branches -- smaller and located near larger Wells Fargo branches -- that will be closed.

Even with the downsizing, Wells Fargo will remain one of the larger banks in California, with more than 1,000 branches in the state.

Wells Fargo brokered a deal to purchase Wachovia in the wake of last year's banking sector meltdown, when it suddenly became evident that a number of institutions were insolvent, because of their investment in mortgage backed securities.

In October 2008, The Charlotte Observer reported Wachovia experienced a "silent run" as large customers closed out their accounts, fearful of a collapse. As a result, there were real concerns the bank wouldn't be able to remain open.

The situation became urgent after Wachovia executives noticed an unusual number of withdrawals the day after the Washington Mutual failure. Many of the withdrawals were made by large corporate depositors, who had more than $100,000 in the bank. As a result, the bank's operating capital fell to dangerously low levels.

Illinois Attorney General Lisa Madigan has filed suit against Wells Fargo and Company, charging the bank discriminated against African American and Latino homeowners by selling them high-cost subprime mortgage loans while white borrowers with similar incomes received lower cost loans.

As a result of its discriminatory and illegal mortgage lending practices, Wells Fargo transformed our cities predominantly African-American and Latino neighborhoods into ground zero for subprime lending, said Madigan. The dreams of many hardworking families have ended in foreclosure due to Wells Fargos illegal and unfair conduct.

Madigans lawsuit, which is the result of an investigation into possible violations of fair lending and consumer fraud laws, cites marked disparities in Wells Fargos lending data. In 2005, according to an analysis of Chicago-area data, approximately 45 percent of Wells Fargos African-American borrowers and 23 percent of the lenders Latino borrowers received a high-cost mortgage. That same year, only about 11 percent of the lenders white borrowers received high-cost mortgages.

The trend continued in 2006, with approximately 58.5 percent of Wells Fargos African-American borrowers and 35 percent of its Latino borrowers in the Chicago area receiving high-cost mortgages, compared with only 16 percent of white borrowers. In 2007, approximately 49 percent of Wells Fargos African-American borrowers and 25 percent of Latino borrowers were sold a high-cost loan in the Chicago area, compared with only 15 percent of white borrowers.

The lawsuit also follows a recent Chicago Reporter analysis of mortgage data submitted by Wells Fargo to the federal government. That study found that, in 2007, Wells Fargo sold high-cost, subprime loans more often to its highest-earning African-American borrowers in Chicago than to its lowest-earning white borrowers. According to the study, in 2007, about 34 percent of African Americans earning $120,000 or more received high cost mortgages from Wells Fargo in the Chicago metro area, while less than 22 percent of white borrowers earning less than $40,000 received high-cost mortgages from the lender.

These disparities indicate that something is very wrong with Wells Fargos mortgage lending, said Madigan. They strongly suggest that the predictor of whether a borrower would receive a high-cost home loan from Wells Fargo was race, not income.

Madigans complaint alleges that Wells Fargo established highly discretionary lending policies and procedures with weak oversight that permitted Wells Fargos employees to steer African-Americans and Latinos into subprime loans. As cited in the complaint, Wells Fargos discretionary policies and procedures included a compensation structure that rewarded employees for placing borrowers into high-cost mortgages.

The complaint also alleges that Wells Fargo targeted African-American borrowers for the sale of high-cost loans by hosting a series of wealth building seminars in cities throughout the country, including Chicago.

Madigan noted that high-cost, subprime loans of the kind sold by Wells Fargo are defaulting and going into foreclosure in record numbers, and are largely responsible for triggering the worst economic recession in recent memory. The Attorney Generals complaint comes as the home foreclosure crisis continues to affect hundreds of thousands of homeowners in Illinois and across the nation. Illinois saw almost 69,000 foreclosure filings in the first half of 2009, up nearly 30 percent from the first half of 2008. In Cook County alone, it is anticipated that mortgage foreclosure filings will top 52,000 by the years end, compared with 43,876 in 2008.

By targeting African-Americans for the sale of its highest-cost and riskiest loans, Wells Fargo drained wealth from families and neighborhoods and added to the stockpile of boarded-up homes that are an open invitation to criminals, Madigan said.

Additionally, the lawsuit alleges that Wells Fargo Financial Illinois, a subsidiary of Wells Fargo and Company that primarily originated subprime loans, engaged in unfair and deceptive business practices by misleading Illinois borrowers about their mortgage terms, misrepresenting the benefits of refinancing, and repeatedly refinancing loans, also known as loan flipping, without any real benefit to consumers.

Also, the complaint maintains that Wells Fargo Financial used deceptive mailings and marketing tools to confuse borrowers as to which division of Wells Fargo and Company they were doing business with prime or subprime. As a result, borrowers believed they were doing business with Wells Fargo Home Mortgage, which offered mainly prime loans, when in fact they were dealing with Wells Fargo Financial, a predominantly subprime lender.

A class action lawsuit alleges that lending giant Wells Fargo profited off an unholy scheme with an appraiser owned by Wells Fargos parent company.

According to the suit, Wells Fargo requires borrowers to use Rels Valuation, an appraisal service owned by the same company that controls Wells Fargo. In turn, Rels, which uses third-party appraisers to perform the work, forces these vendors to come back with an appraisal that meets Wells Fargos expectations, and pays the appraisers well below market value for their services.

Despite the bargain that Wells Fargo receives on the appraisals, it continues to charge consumers the full amount for the service, and pockets the difference.

As described in the suit, Wells Fargos alleged scheme is exceedingly clever and complex. According to the suit, filed in the United States District Court for the District of Arizona, Wells Fargo pressures subcontracting appraisers to report back with a price that will allow Wells Fargo to underwrite the loan without significant obstacles, regardless of whether the figure is accurate.

Additionally, Wells Fargo allegedly informs the appraiser that they will pay them drastically less than the going market rate for their services. If the appraiser refuses to comply with either of these conditions, they are placed on Wells Fargos exclusion list, and are not considered for future appraisals.

Because of Wells Fargos giant stature — it is the number one mortgage lender in the nation — refusal to acquiesce in these demands could mean a drastic drop in appraisers business and significant damage to their reputation.

Under the rules laid out in the Real Estate Settlement Procedures Act (RESPA), no company is allowed to require consumers to use another company, as such arrangements practically invite the kind of price gauging alleged here. However, the Act makes an exception for lenders, since appraisals are ostensibly done to protect their interests, and allowing them to choose a trusted appraiser helps further this purpose.

Under RESPA, however, when a lender requires the use of a certain appraiser, they must inform the consumer both of the relationship and of the amount they were charged by the appraiser. According to the suit, Wells Fargo sometimes disclosed the relationship between themselves and Rels, but never disclosed the price they paid for the appraisals, giving consumers no indication that they were paying as much as twice what Wells Fargo had for the service.

The suit estimates that, given Wells Fargos size and influence, tens or even hundreds of thousands of homeowners have been victimized by the scheme.

It brings claims under both RESPA and the Racketeer Influenced and Corrupt Organizations Act (RICO), since the scheme was allegedly carried out across state lines via U.S. mail and interstate wire facilities. The suit also alleges unjust enrichment against Rels and breach of fiduciary duty and unfair competition against Wells Fargo.

Reader response

I would like to applaud Jon Hood for his bravery in telling the truth. I would also like to thank whatever Attorney(s) are involved and to lend support for their cause. Our business as honest, ethical appraisers has been derailed by these greedy companies. Did you know the CEO for Wells sat on the recent HVCC comittee to determine policy?

RC, Colorado Springs, CO