Rumors have been circulating, including the most recent report Thursday, that the Consumer Financial Protection Bureau is on the brink of hitting Wells Fargo with a $1 billion fine.
Well now, the protection bureau announced exactly that.
The CFPB announced a settlement with Wells Fargo in a coordinated action with the Office of the Comptroller of the Currency.
The bureau found Wells Fargo violated the Consumer Financial Protection Act in the way it administered a mandatory insurance program related to its auto loans. The bureau also found that the bank violated the CFPA in how it charged certain borrowers for mortgage interest rate-lock extensions.
As expected, the bank will be assessed a $1 billion penalty from the CFPB and a $500 million penalty from the OCC. The CFPB will credit the $500 million penalty collected by the OCC toward the satisfaction of its fine. Wells Fargo will also be required to remediate harmed consumers and undertake certain activities related to its risk management and compliance management.
Under the consent orders, Wells Fargo will also be required to submit, for review by its board, plans detailing its ongoing efforts to strengthen its compliance and risk management, and its approach to customer remediation efforts.
“I am especially pleased that we were able to work closely and effectively with our colleagues at the OCC, and I appreciate the key role they played in the negotiations,” CFPB Acting Director Mick Mulvaney said. “As to the terms of the settlement: we have said all along that we will enforce the law. That is what we did here.”
The OCC explained it took these actions given the severity of the deficiencies and violations of law, the financial harm to consumers, and the bank’s failure to correct the deficiencies and violations in a timely manner. The OCC found deficiencies in the bank’s enterprise-wide compliance risk management program that constituted reckless, unsafe, or unsound practices and resulted in violations of the unfair practices prong of Section 5 of the Federal Trade Commission Act.
The agency also found the bank violated the FTC Act and engaged in unsafe and unsound practices relating to improper placement and maintenance of collateral protection insurance policies on auto loan accounts and improper fees associated with interest rate lock extensions. These practices resulted in consumer harm which the OCC has directed the bank to remediate.
“For more than a year and a half, we have made progress on strengthening operational processes, internal controls, compliance and oversight, and delivering on our promise to review all of our practices and make things right for our customers,” Wells Fargo President and CEO Timothy Sloan said.
“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 company will adjust its first quarter 2018 preliminary financial results by an additional accrual of $800 million, which is not tax deductible. The accrual reduces reported first quarter 2018 net income by $800 million, or $0.16 per diluted common share, to $4.7 billion, or $0.96 per diluted common share.
Earlier this month, reports emerged that the CFPB was seeking a “record fine” against Wells Fargo for mortgage and auto insurance issues and a Reuters report suggested that CFPB Acting Director Mick Mulvaney was considering a fine of as much as $1 billion for the issues.
Later, in the bank’s earnings report, Wells Fargo confirmed that it was, in fact, facing the fine. It explained that the CFPB and the OCC collectively offered to resolve “matters regarding our compliance risk management program and our past practices involving certain automobile collateral protection insurance policies and certain mortgage interest rate lock extensions” for an aggregate $1 billion in civil money penalties.
But there was still no word from the CFPB on the rumored fine.
Thursday, the Washington Post reported that sources familiar with the matter saying the fine could be officially announced as soon as Friday [today.]
As predicted in the report, the CFPB officially announced the fine Friday morning.