Wells Fargo hit with big penalties for mortgage, auto insurance practices

Wells Fargo hit with big penalties for mortgage, auto insurance practices
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CHARLOTTE, NC (Deon Roberts/The Charlotte Observer) - Wells Fargo will pay $1 billion in fines to two U.S. regulators, the agencies announced Friday, in the latest fallout for the bank as it reels from a wave of scandals.

Wells Fargo disclosed last week it was in settlement talks with the two regulators over its risk management, as well as practices in its mortgage and auto-lending businesses. At the time, Wells Fargo said the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency had offered a combined settlement of $1 billion.

The regulators said Friday the OCC's portion — $500 million — was used by the CFPB toward the satisfaction of that agency's $1 billion fine.

The punishment marks another stumble for the San Francisco-based bank, which has been under investigation by state and federal authorities for a variety of practices since a 2016 sales scandal over unauthorized customer accounts. That scandal resulted in a CFPB fine of $100 million, the largest penalty the bureau has imposed on a financial institution.

Wells last year disclosed problematic practices involving auto insurance and mortgage products. Those practices included improperly charging customers to lock in mortgage interest rates and charging customers premiums for auto insurance they didn't need.

In a statement, Wells Fargo CEO Tim Sloan said the bank for more than a year and a half has made progress in strengthening operational processes, internal controls, compliance and oversight, as well as reviewing all of its practices.

"While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency," Sloan said. "Our customers deserve only the best from Wells Fargo, and we are committed to delivering that."

The settlement adds to legal costs Wells Fargo has faced since the sales scandal. Last week, the bank reported a $5.9 billion profit in the first quarter, but noted the results might have to be restated. On Friday, the bank said the fines reduced its profit for that quarter to a revised $4.7 billion.

The CFPB fines are the first from former Charlotte-area congressman Mick Mulvaney, whom President Donald Trump tapped last year to head the agency.

Trump, in a tweet last December, took aim at Wells, pledging that fines and penalties against the bank "will not be dropped." The tweet came after news reports that Mulvaney was reviewing whether Wells should pay tens of millions of dollars over alleged mortgage abuses.

Meanwhile, Wells Fargo still faces other investigations, including one into its wealth and investment management business. Last month, it disclosed the probe by federal authorities, as well as a review by the bank's board of activities within the business unit.

Asked about that investigation last week, Chief Financial Officer John Shrewsberry said he couldn't discuss the ongoing matter, "because it's midway through."

In other regulatory actions against Wells Fargo this year, the Federal Reserve placed restrictions on the bank's growth, in an unprecedented step. In harshly worded letters the Fed accused Wells' board of failing to properly oversee the company, which the regulator said must improve its governance and controls.

This is a developing story.