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They never stop trying: Wells Fargo to pay $3.7B over consumer law violations


Following are lightly edited excerpts from a current report by the Associated Press:

WASHINGTON (AP) — Consumer banking giant Wells Fargo agreed to pay $3.7 billion to settle charges that it harmed customers by charging illegal fees and interest on auto loans and mortgages, as well as incorrectly applying overdraft fees against savings and checking accounts.

Wells was ordered to repay $2 billion to consumers by the Consumer Financial Protection Bureau, which also enacted a $1.7 billion penalty against the San Francisco bank Tuesday. It’s the largest fine ever leveled against a bank by the CFPB and the largest yet against Wells, which has spent years trying to rehabilitate its image after a series of scandals tied to its sales practices.

Regulators made it clear, however, that they believe Wells Fargo has further to go on that front. “Put simply: Wells Fargo is a corporate recidivist that puts one out of three Americans at risk for potential harm,” said CFPB Director Rohit Chopra, in a call with reporters.

The bank’s pattern of behavior has made it necessary for regulators to take additional actions against Wells Fargo that go beyond the $3.7 billion in fines and penalties, Chopra said.

The violations impacted more than 16 million customers, the bureau said. In addition to improperly charging auto loan customers with fees and interest, the bank wrongfully repossessed vehicles in some cases. The bank also improperly denied thousands of mortgage loan modifications for homeowners.

Wells Fargo has been sanctioned repeatedly by U.S. regulators for violations of consumer protection laws going back to 2016, when employees were found to have opened millions of accounts illegally in order to meet unrealistic sales goals. Since then, executives have repeatedly said Wells is cleaning up its act, only for the bank to be found in violation of other parts of consumer protection law, including in its auto and mortgage lending businesses.

Wells paid a $1 billion penalty in 2018 for widespread consumer law violations, the largest against a bank for such violations at the time. Wells remains under a Federal Reserve order forbidding the bank from growing any larger until the Fed deems that its problems are resolved. That order, originally enacted in 2018, was expected to last only a year or two.

CEO Charles Scharf said in a prepared statement Tuesday that the agreement with the CFPB is part of an effort to “transform operating practices at Wells Fargo and to put these issues behind us.”

While Wells Fargo tried to frame the agreement with the CFPB as a resolution of established bad behavior, CFPB officials said some of the violations cited in Tuesday’s order took place this year.

“This should not been seen as Wells Fargo has moved past its problems,” Chopra said.

(Text emphasis added)

Comments

  • We bought a bed and side table when we first got here. Great financing: zero interest for five years. Through Wells. Can we do this through any other source? Nope. Shit, OK, then. And they sent us a credit card we NEVER have used. Wells is a cesspool. Almost finished with the payments. Then I cancel that card!
  • edited December 2022
    The only relationship I have with WF is thru Wells Fargo Advisors who acquired AG Edwards brokerage and a full-service account I had with them ... for a few family reasons I'm waiting to do anything, but at some point, and certainly when my full-service guy (whom I like) retires, I will have no qualms moving the account elsewhere.

    While I hate most banks and don't trust any of 'em, I truly despise WF. The only big bank I can stomach to some degree is JPM, but I have no relationship with them outside of some credit cards.


  • OK, then. And they sent us a credit card we NEVER have used

    A Fidelity 2% cash back credit card requires you to have a Fidelity account to redeem that 2%. The WF card doesn't come with a similar requirement.

    I guess WF figures that once it's got your name it can reel you in for other accounts, whether through honest sales practices or through less scrupulous means. Same for that zero interest loan.
  • msf said:

    OK, then. And they sent us a credit card we NEVER have used

    A Fidelity 2% cash back credit card requires you to have a Fidelity account to redeem that 2%. The WF card doesn't come with a similar requirement.

    I guess WF figures that once it's got your name it can reel you in for other accounts, whether through honest sales practices or through less scrupulous means. Same for that zero interest loan.

    Actually, the account number on the zero-interest loan is the same number as the credit card. Fishy. Yup. Smells like 6-day old dead fish.
  • Likely the zero-interest loan is the hook. Once you start using the card the rates might just be a bit more than zero.
  • Agree Old_Joe. This is not unordinary or specific to WF. It's no different than other cards like Lowes, Home Depot, Best Buy, your local furniture store. Why else would they give you zero % interest on the initial buy if not for the possibly you use their card later with higher interest rates? It's not because they are kind hearted. Crash may not have understood he was opening up a credit account/card but that's how it works for all of these stores.

    Once you have it though you don't want to cancel it. Better for your credit standing to keep it and not use it.
  • Following is the complete text from a current newsletter by Matt Levine, who writes the "Money Stuff" column for Bloomberg. The newsletter is free, so there should be no issue with it's reproduction here.

    If you would kike to subscribe to this free newsletter from Matt Levine, here is the link.

    Oh Wells Fargo
    I think often about the time I wrote:
    If you have U.S. dollars in a bank account at JPMorgan Chase & Co., and I have U.S. dollars in a bank account at JPMorgan Chase & Co., and I want to send you 100 of my dollars, what we do is I tell JPMorgan to subtract 100 from the number of dollars in my bank account and add 100 to the number of dollars in your bank account. This gets dressed up in a lot of procedures, because it would be bad if JPMorgan got the math wrong or if it moved money from one account to another without getting the proper authorizations, but as a matter of, like, computer science, it is dead easy. JPMorgan keeps a list of people and how many dollars they have, and you and I both trust JPMorgan to keep that list (that’s what it means that we bank there!), and so we just tell JPMorgan to update the list to reflect the transaction between us.
    And lots of computer engineers tweeted and emailed to be like “no, actually, it is a hard problem of computer science to have a big database of who has what, and to update it instantly and reliably to reflect transactions from many different sources.” And I was like, sure, fine, I guess. I still feel like I was entitled to be right: A bank is, at its heart, a computer for keeping track of who has money, and for updating its ledger as people send and receive money. And at a high level you and I could describe how we’d expect that computer to work — “if I deposit $100 in an ATM, the bank will increase the number in my account by $100,” that sort of thing — and we will be disappointed if it doesn’t work that way, if the bank loses track of who has the money or how much they have, or if it doesn’t update its ledger promptly or process transactions in the right order. If the bank messes up and says “look I am sorry but keeping track of money is a hard job and you can’t expect us to do it with 100% accuracy,” we will say things like “yes we can” and “that is literally exactly what we expect of you” and “if keeping track of the money is too hard for you then maybe you should not be a bank” and “now you have to pay an enormous fine.” And yet, sure, empirically, banks do sometimes mess it up. It’s not as easy as it sounds.

    Wells Fargo, for instance, messes it up a lot:
    The Consumer Financial Protection Bureau (CFPB) is ordering Wells Fargo Bank to pay more than $2 billion in redress to consumers and a $1.7 billion civil penalty for legal violations across several of its largest product lines. The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes. Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank. Wells Fargo also charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts. Under the terms of the order, Wells Fargo will pay redress to the over 16 million affected consumer accounts, and pay a $1.7 billion fine, which will go to the CFPB's Civil Penalty Fund, where it will be used to provide relief to victims of consumer financial law violations.
    Here is the CFPB’s consent order from yesterday, which is basically just a litany of “Wells Fargo’s computers messed up.” For instance:
    Respondent also assessed borrowers erroneous fees and interest because of technology, audit, and compliance failures. As an example, from at least 2011 until at least March 2019, Respondent sometimes incorrectly entered the effective date of a payment deferment in, or omitted it from, its servicing system-of-record, which resulted in $26.5 million in erroneously assessed late fees to more than 688,000 borrower accounts.
    If you owe Wells Fargo money on a car loan, and you don’t pay it, and you have a payment deferment, they won’t charge you a fee, but if you don’t have a payment deferment they will. But if you have a payment deferment, but they don’t write it down in the right place, they will also charge you the fee, and then they will get in trouble. In some sense this is profit-maximizing behavior by Wells Fargo: If they agree to defer payments, and then charge you the fees anyway, they will make more money in fees. But it doesn’t seem intentional, and the CFPB doesn’t think it was. (Why say you agree to the deferment, and then charge the fees?) It seems like a failure of systems, of “technology, audit and compliance”: Wells Fargo did not do a good job of keeping track of deferments, so it sometimes charged fees by mistake.
    Or:
    From at least 2011 through 2022, Respondent experienced other types of servicing errors, which had the potential to contribute to a borrower’s delinquency, and in some cases led to improper repossessions. For example, Respondent repossessed vehicles despite the borrower having made a payment or entering into an agreement to forestall the repossession.
    (Continued)

  • edited December 2022

    Matt Levine, Part 2:

    If you are delinquent on a car loan to Wells Fargo, eventually some system at Wells Fargo decides to repossess your car. There is some delay between when this system sets the repossession in motion and when someone actually takes the car. In the meantime, if you make a payment, or sign an agreement with some other person at Wells Fargo to avoid repossession, then some other system at Wells Fargo knows that Wells Fargo should not repossess your car. Do those systems talk to each other? Does the person signing the agreement, or the mailbox receiving your payment, have a way to stop the repossession that is lurching into motion? Meh, sometimes, maybe, but not all the time.

    Again, this does not seem like rational profit-maximizing behavior by Wells Fargo; repossessing the car is surely more of a pain than having the borrower start making payments again. No one at Wells Fargo was like “bwahahaha, a clever trick would be to repossess people’s cars even after they start paying their loans back.” Wells Fargo just did it anyway. It is an emergent feature of Wells Fargo’s bureaucracy, and its computers.
    Or:
    Guaranteed Asset Protection (GAP) contracts are a type of debt cancellation contract (DCC) that generally relieve the borrower from the obligation to pay the remaining amount of the borrower’s loan on the vehicle above the vehicle’s depreciated value in the case of a major accident or theft. The auto dealer markets GAP coverage to the borrower and is paid the GAP fee. However, borrowers often finance GAP fees as part of their auto loan at origination and the GAP contract becomes part of the auto loan contract. If the borrower pays off the loan early, or the GAP contract otherwise terminates, the borrower may be entitled to a refund of the unearned portion of the GAP fee that they financed when first buying the vehicle. Such refund obligations usually are governed by the terms of the GAP contract executed between the borrower and the originating dealer, with GAP contracts sometimes requiring that the borrower make a written request to the originating dealer for a GAP refund. Respondent, as the owner and servicer of the GAP contracts, did not ensure that unearned GAP fees were refunded to all borrowers who paid off their loans early.
    That is just, like, Wells Fargo entered into a complicated contract with its auto-loan borrowers, and the contract provided that in certain circumstances, years in the future, Wells Fargo would have to send some money to the borrowers, and Wells Fargo just stuck the contract in a drawer somewhere and ignored it, and so did the borrowers, so it never sent them the money. Very understandable, for the borrowers, who are busy people who have jobs and lives and are not necessarily reading every word of their auto-loan contracts. Less understandable, for the bank, which is a bank.
    Or:
    Another error occurred from July 2013 until September 2018, when Respondent did not offer no-application modifications to approximately 190 borrowers with Government Sponsored Entity (GSE) loans. Respondent erroneously identified these borrowers as deceased and therefore did not assess their eligibility for modifications. Respondent is paying approximately $2.4 million in remediation to these borrowers.
    It is a little hard to tell how that one would work? Like, the rule is something like “certain mortgage borrowers need to be offered this loan modification.” Wells Fargo went through its records to see who needed to be offered the modification, and decided not to offer it to these 190 people because they were dead. They were not dead, so, a failure of record-keeping by Wells Fargo. But also … they were not offered the modification, so they kept paying their mortgages?[1] Like every month Wells Fargo would get a check from these people whom it had erroneously identified as deceased? If you got a check every month from someone who you thought was dead, you would be surprised, and presumably you would update your views. (You might think “aha, they are not dead,” or you might think “wow ghosts are real and very financially responsible,” or you might call them to say “so are you dead or what?”) But Wells Fargo is not a human with normal human intuitions. It is a big bureaucratic institution with databases that don’t necessarily talk to each other in sensible ways, and it blithely went along cashing checks from people while also believing they were dead.

    Here are CFPB Director Rohit Chopra’s remarks on the enforcement action:
    In the CFPB’s eleven years of existence, Wells Fargo has consistently been one of the most problematic repeat offenders of the banks and credit unions we supervise. …

    Put simply, Wells Fargo is a corporate recidivist that puts one third of American households at risk of harm. Finding a permanent resolution to this bank’s pattern of unlawful behavior is a top priority. Today, CFPB is announcing an important step toward that goal: restitution for victims of Wells Fargo’s widespread illegal activities. …

    While today’s order addresses a number of consumer abuses, it should not be read as a sign that Wells Fargo has moved past its longstanding problems or that the CFPB’s work here is done. Importantly, the order does not provide immunity for any individuals, nor, for example, does it release claims for any ongoing illegal acts or practices.

    While $3.7 billion may sound like a lot, the CFPB recognizes that this alone will not fix Wells Fargo’s fundamental problems. Over the past several years, Wells Fargo executives have taken steps to fix longstanding problems, but it is also clear that they are not making rapid progress. We are concerned that the bank’s product launches, growth initiatives, and other efforts to increase profits have delayed needed reform.
    Imagine being the sort of person who gets ahead in banking and becomes a senior executive at Wells Fargo. One of your subordinates comes to you to be like “I have an idea for a new product that will attract a lot of customers and bring in a lot of revenue.” Another one of your subordinates comes to you to be like “sometimes we charge people late fees even after agreeing not to, because our systems don’t talk to each other very well; I have an idea for how to modernize them to make sure that doesn’t happen. It will cost a lot of money, but in exchange we, uh, won’t get to charge as many late fees?” Which subordinate would you want to spend more time with? Who sounds like more fun?


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