Wells Fargo is getting slammed with all kinds of penalties over shady business practices. Currently prohibited from growing its business as investigators look into its practices, the bank is restructured itself after it was implicated in widespread auto insurance and mortgage lending abuse in the summer of 2017. It’s also still coping with an earlier scandal involving local branches opening fake accounts for customers.
Last week,Â the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency suggested Well Fargo pay $1 billion to “resolve” the governmental probes into those issues. That changed today when the bureau filed a consent order announcing it was time for the bank to pay up.
The fine applies to the mortgage lending issues, as well as Wells Fargo’s past practice ofÂ charging thousands of auto loan customersÂ for insurance they didn’t need and often didn’t even know about. The move caused some borrowers to default on their loans, resulting in their vehicles being repossessed. The consent order mandates that the bankÂ remediate those customers.Â
TheÂ Consumer Financial Protection Bureau said it assessed a $1 billion penalty against Wells Fargo and credited a $500 million penalty collected by the Office of the Comptroller of the Currency toward the total fine.
While the fine is among the largest ever levied on a bank in the United States, analysts claim it won’t spell the end for the company.
“Operationally, Wells Fargo can recover, but reputationally and how a billion dollars will weigh on themÂ â€” only time can tell,” Art Hogan, chief market strategist at B. Riley in Boston, told Reuters. “Companies have come back from worse than this but right now theyâ€™re still in the eye of the storm.”
Despite the bank’s shares taking a dive after the scandal became public knowledge in 2017, they appear to have stabilized somewhat within the last month.
Over 800,000 customers were believed to be affected by the auto insurance issue over roughly a four-year period. In August, Wells Fargo said it found that, in issuing auto loans, the bank charged some customers extra for collision insurance, even when customers already had it in their policy. President Donald Trump said federal agencies needed to go after the bank hard to set an example.
Afterward, the Federal Reserve mandated that Wells Fargo could not grow its business until it fixed its multitude of problems (and offered proof). The $1 billion penalty is the largest theÂ Consumer Financial Protection Bureau has ever issued.
[Image: Ron Cogswell/FlickrÂ (CC BY 2.0)]