Former Wells Fargo Head of Bank Pays $3 Million Penalty for Misleading Investors on Misselling Banking Products & Unauthorized Account Opening with Ex-CEO John Stumpf Paying $2.5 Million, Wells Fargo Paid $1 Billion for Investors Lawsuit & $3.7 Billion in Regulatory Fines
31st May 2023 | Hong Kong
Former Wells Fargo Head of Community Bank (Carrie L. Tolstedt) has agreed to pay $3 million in penalty to United States SEC (Securities & Exchange Commission) for misleading investors on misselling banking products & unauthorized account opening with ex-CEO John Stumpf paying $2.5 million in 2020. Earlier in 2023 May, Wells Fargo has agreed to pay $1 billion to settle a class action lawsuit of defrauding shareholders on misleading (United States) federal compliance on the 2016 scandal of opening 3.5 million accounts without permissions, and was also fined $3.7 billion in 2022 for illegally charging of fees on overdrafts, mortgages & car loans on 16 million customers. United States SEC: “According to the SEC’s complaint against Tolstedt, from mid-2014 through mid-2016, Tolstedt publicly described and endorsed Wells Fargo’s “cross-sell metric” as a means of measuring Wells Fargo’s financial success despite the fact that this metric was inflated by accounts and services that were unused, unneeded, or unauthorized. The complaint further alleges that Tolstedt knew the cross-sell metric did not accurately track accounts or products that customers needed or used, since she was aware of misconduct at the Community Bank that led to bankers pushing products on customers that they did not need or want, including the unauthorized opening of accounts. The complaint alleges that Tolstedt made misleading public statements to investors at Wells Fargo’s investor conferences in 2014 and 2016, and signed misleading sub-certifications as to the accuracy of Wells Fargo’s public disclosures when she knew or was reckless in not knowing that statements in those disclosures regarding Wells Fargo’s cross-sell metric were materially false and misleading.” Monique C. Winkler, Regional Director of the SEC’s San Francisco Regional Office: “Companies do not act on their own. Where the facts warrant it, we will hold senior executives accountable for conduct that violates the securities laws.” See below for full statement.
“ Former Wells Fargo Head of Bank Pays $3 Million Penalty for Misleading Investors on Misselling Banking Products & Unauthorized Account Opening with Ex-CEO John Stumpf Paying $2.5 Million, Wells Fargo Paid $1 Billion for Investors Lawsuit & $3.7 Billion in Regulatory Fines “
Former Wells Fargo Head of Bank Pays $3 Million Penalty for Misleading Investors on Misselling Banking Products & Unauthorized Account Opening with Ex-CEO John Stumpf Paying $2.5 Million
- Former Wells Fargo Senior Executive Carrie Tolstedt Agrees to Settle SEC Fraud Charges for Misleading Investors About Abusive Sales Practices to Inflate a Key Performance Metric
30th May 2023 – The Securities and Exchange Commission today announced its settlement with the former head of Wells Fargo & Co.’s Community Bank, Carrie L. Tolstedt, in which she has agreed to pay a $3 million penalty stemming from charges brought in 2020 for her role in allegedly misleading investors about the success of the Community Bank, Wells Fargo’s core business. The SEC previously settled related charges against Wells Fargo and its former CEO and Chairman, John Stumpf.
According to the SEC’s complaint against Tolstedt, from mid-2014 through mid-2016, Tolstedt publicly described and endorsed Wells Fargo’s “cross-sell metric” as a means of measuring Wells Fargo’s financial success despite the fact that this metric was inflated by accounts and services that were unused, unneeded, or unauthorized. The complaint further alleges that Tolstedt knew the cross-sell metric did not accurately track accounts or products that customers needed or used, since she was aware of misconduct at the Community Bank that led to bankers pushing products on customers that they did not need or want, including the unauthorized opening of accounts. The complaint alleges that Tolstedt made misleading public statements to investors at Wells Fargo’s investor conferences in 2014 and 2016, and signed misleading sub-certifications as to the accuracy of Wells Fargo’s public disclosures when she knew or was reckless in not knowing that statements in those disclosures regarding Wells Fargo’s cross-sell metric were materially false and misleading.
“Companies do not act on their own. Where the facts warrant it, we will hold senior executives accountable for conduct that violates the securities laws,” said Monique C. Winkler, Regional Director of the SEC’s San Francisco Regional Office.
Tolstedt, without admitting or denying the SEC’s allegations, agreed to a final judgment permanently enjoining her from violating, or aiding and abetting violations of, the antifraud and other provisions of the federal securities laws and imposing a permanent officer-and-director bar. In addition to the $3 million civil penalty, Tolstedt agreed to pay disgorgement of $1,459,076 plus prejudgment interest of $447,874. The SEC will combine this money with $500 million paid by Wells Fargo and the $2.5 million penalty paid by Stumpf in previous settlements and distribute the sum to harmed investors. The settlement is subject to court approval.
The SEC’s complaint was filed in the U.S. District Court for the Northern District of California. The litigation was conducted by Susan LaMarca, Erin Wilk, Victor Hong, John Roscigno, and Horace Austin of the SEC’s San Francisco Regional Office. The case was supervised by Jason H. Lee and Ms. Winkler.
Wells Fargo to Pay $1 Billion to Settle Class Action Lawsuit of Defrauding Shareholders on Misleading Federal Compliance for 2016 Scandal of Opening 3.5 Million Accounts Without Permissions, Fined $3.7 Billion in 2022 for Illegally Charging of Fees on Overdrafts, Mortgages & Car Loans on 16 Million Customers
17th May 2023 – Wells Fargo has agreed to pay $1 billion to settle a class action lawsuit of defrauding shareholders on misleading (United States) federal compliance on the 2016 scandal of opening 3.5 million accounts without permissions, and was also fined $3.7 billion in 2022 for illegally charging of fees on overdrafts, mortgages & car loans on 16 million customers. Shareholders sued Wells Fargo in 2020 for misleading statements to investors, media & United States Congress. The $1 billion settlement will pay investors who had bought Wells Fargo shares from 2nd February 2018 to 12th March 2020. The case is In re Wells Fargo & Co Securities Litigation, U.S. District Court, Southern District of New York, No. 20-04494. More info on Wells Fargo $3.7 billion fine below.
Wells Fargo Fined $3.7 Billion for Illegal Charging of Fees on Overdrafts, Mortgages & Car Loans on 16 Million Customers, $2 Billion to Repay Customers & $1.7 Billion Penalty
22nd December 2022 – United States consumer banking giant Wells Fargo had been fined $3.7 billion for illegal charging of fees on overdrafts, mortgages & car loans on 16 million customers, with Wells Fargo to repay $2 billion to customers and pay a penalty of $1.7 billion. Charlie Scharf, Wells Fargo CEO: “ We and our regulators have identified a series of unacceptable practices that we have been working systematically to change and provide customer remediation where warranted. This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us. Our top priority is to continue to build a risk and control infrastructure that reflects the size and complexity of Wells Fargo and run the company in a more controlled, disciplined way.” Consumer Financial Protection Bureau: 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.
Consumer Financial Protection Bureau on Wells Fargo
CFPB Orders Wells Fargo to Pay $3.7 Billion for Widespread Mismanagement of Auto Loans, Mortgages, and Deposit Accounts
Company repeatedly misapplied loan payments, wrongfully foreclosed on homes and illegally repossessed vehicles, incorrectly assessed fees and interest, charged surprise overdraft fees, along with other illegal activity affecting over 16 million consumer accounts
20th Dec 2022 – 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.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said CFPB Director Rohit Chopra. “The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”
Wells Fargo (NYSE: WFC) is one of the nation’s largest banks serving households across the country. It offers a variety of consumer financial services, including mortgages, auto loans, savings and checking accounts, and online banking services.
According to today’s enforcement action, Wells Fargo harmed millions of consumers over a period of several years, with violations across many of the bank’s largest product lines. The CFPB’s specific findings include that Wells Fargo:
- Unlawfully repossessed vehicles and bungled borrower accounts: Wells Fargo had systematic failures in its servicing of automobile loans that resulted in $1.3 billion in harm across more than 11 million accounts. The bank incorrectly applied borrowers’ payments, improperly charged fees and interest, and wrongfully repossessed borrowers’ vehicles. In addition, the bank failed to ensure that borrowers received a refund for certain fees on add-on products when a loan ended early.
- Improperly denied mortgage modifications: During at least a seven-year period, the bank improperly denied thousands of mortgage loan modifications, which in some cases led to Wells Fargo customers losing their homes to wrongful foreclosures. The bank was aware of the problem for years before it ultimately addressed the issue.
- Illegally charged surprise overdraft fees: For years, Wells Fargo unfairly charged surprise overdraft fees – fees charged even though consumers had enough money in their account to cover the transaction at the time the bank authorized it – on debit card transactions and ATM withdrawals. As early as 2015, the CFPB, as well as other federal regulators, including the Federal Reserve, began cautioning financial institutions against this practice, known as authorized positive fees.
- Unlawfully froze consumer accounts and mispresented fee waivers: The bank froze more than 1 million consumer accounts based on a faulty automated filter’s determination that there may have been a fraudulent deposit, even when it could have taken other actions that would have not harmed customers. Customers affected by these account freezes were unable to access any of their money in accounts at the bank for an average of at least two weeks. The bank also made deceptive claims as to the availability of waivers for a monthly service fee.
Wells Fargo is a repeat offender that has been the subject of multiple enforcement actions by the CFPB and other regulators for violations across its lines of business, including faulty student loan servicing, mortgage kickbacks, fake accounts, and harmful auto loan practices.
Enforcement action
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating federal consumer financial laws, including by engaging in unfair, deceptive, or abusive acts or practices. The CFPB’s investigation found that Wells Fargo violated the Act’s prohibition on unfair and deceptive acts and practices.
The CFPB order requires Wells Fargo to:
- Provide more than $2 billion in redress to consumers: Wells Fargo will be required to pay redress totaling more than $2 billion to harmed customers. These payments represent refunds of wrongful fees and other charges and compensation for a variety of harms such as frozen bank accounts, illegally repossessed vehicles, and wrongfully foreclosed homes. Specifically, Wells Fargo will have to pay:
- More than $1.3 billion in consumer redress for affected auto lending accounts.
- More than $500 million in consumer redress for affected deposit accounts, including $205 million for illegal surprise overdraft fees.
- Nearly $200 million in consumer redress for affected mortgage servicing accounts.
- Stop charging surprise overdraft fees: Wells Fargo may not charge overdraft fees for deposit accounts when the consumer had available funds at the time of a purchase or other debit transaction, but then subsequently had a negative balance once the transaction settled. Surprise overdraft fees have been a recurring issue for consumers who can neither reasonably anticipate nor take steps to avoid them.
- Ensure auto loan borrowers receive refunds for certain add-on fees: Wells Fargo must ensure that the unused portion of GAP contracts, a type of debt cancellation contract that covers the remaining amount of the borrower’s auto loan in the case of a major accident or theft, is refunded to the borrower when a loan is paid off or otherwise terminates early.
- Pay $1.7 billion in penalties: Wells Fargo will pay a $1.7 billion penalty to the CFPB, which will be deposited into the CFPB’s victims relief fund.
Read CFPB Director Chopra’s remarks on a press call announcing the action.
The CFPB wishes to thank members of the public who submitted complaints through the CFPB’s complaint system across Wells Fargo product lines. These complaints aided in the detection of some of the illegal activity uncovered in the CFPB’s investigation.
The CFPB is also grateful for the cooperation and the substantial work performed by the Office of the Comptroller of the Currency, whose efforts have contributed to the significant remediation received by consumers harmed by the bank’s illegal activity, and the Federal Reserve Board of Governors.
Consumers who are experiencing ongoing problems with Wells Fargo, or other financial providers, can submit complaints by visiting the CFPB’s website or by calling (855) 411-CFPB (2372). The Bureau also has resources for consumers about mortgage servicing, auto loans, and deposit accounts:
- Mortgage servicing: https://www.consumerfinance.gov/consumer-tools/mortgages/
- Auto loans: https://www.consumerfinance.gov/consumer-tools/auto-loans/
- Deposit Accounts: https://www.consumerfinance.gov/consumer-tools/bank-accounts/
- Wells Fargo employees who are aware of other illegal activity are encouraged to send information about what they know to [email protected].
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.
Wells Fargo Statement
Wells Fargo Enters into Agreement with Consumer Financial Protection Bureau to Resolve Multiple Issues
20th Dec 2022 – Wells Fargo said today that it has reached a broad-reaching settlement with the Consumer Financial Protection Bureau (“CFPB”) resolving multiple matters, the majority of which have been outstanding for several years, related to automobile lending, consumer deposit accounts, and mortgage lending. Current leadership has made significant progress to transform Wells Fargo; in fact, the CFPB recognized that since 2020, the company has accelerated corrective actions and remediation, including to address the matters covered by today’s settlement. The required actions related to many of the matters described in the settlement are already substantially complete. The company is pleased to bring closure to these issues. As part of the settlement, Wells Fargo entered into a consent order, which lays out a path to termination after the company completes the remainder of the required actions. The company also agreed to pay a civil penalty of $1.7 billion.
“As we have said before, we and our regulators have identified a series of unacceptable practices that we have been working systematically to change and provide customer remediation where warranted. This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us,” said Charlie Scharf, Wells Fargo’s Chief Executive Officer. “Our top priority is to continue to build a risk and control infrastructure that reflects the size and complexity of Wells Fargo and run the company in a more controlled, disciplined way.”
In addition, the CFPB is clarifying how and when its April 20, 2018 consent order will terminate. Also today, the CFPB is terminating its August 20, 2016 consent order relating to Wells Fargo’s student loan servicing.
“We have made significant progress over the last three years and are a different company today,” Scharf said. “We remain committed to doing the right thing for our customers and working closely with our regulators and others to deal appropriately with any issue that arises.”
Wells Fargo expects operating losses expense, which is included in its non-interest expense, will be approximately $3.5 billion (approximately $2.8 billion, net of tax) for the three months ending on December 31, 2022. This includes, among other things, the incremental costs of the CFPB civil penalty and related customer remediation as well as amounts related to outstanding litigation matters and other customer remediation. The company’s full fourth quarter financial results will be reported on January 13, 2023.
Wells Fargo has made significant progress in strengthening its risk and control infrastructure over the past several years. Today’s news follows the termination or expiration of several consent orders since 2020, as follows:
- The December 2021 termination of the Office of the Comptroller of the Currency’s (“OCC”) consent order issued in June 2015 regarding add-on products that the bank sold to retail banking customers before 2015;
- The September 2021 expiration of a CFPB consent order issued in 2016 regarding the bank’s retail sales practices;
- The January 2021 termination of the OCC’s 2015 consent order regarding Wells Fargo’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program; and
- The January 2020 expiration of a CFPB consent order issued in January 2015 regarding claims that the bank violated the Real Estate Settlement Procedures Act.
Since 2019, the company has made a series of changes to transform the way it operates, including:
- Split three business groups into five and created four new Enterprise Functions to enable greater oversight and transparency;
- Made significant changes to senior leadership, including 12 of 17 Operating Committee members and over 50% of the leaders one level below the Operating Committee being new to Wells Fargo since October 2019;
- Embedded greater accountability for risk management into performance management and compensation practices;
- Strengthened the ability to identify and mitigate operational risks;
- Established a new Control Management organization and program; and
- Launched the Office of Consumer Practices, an enterprise-wide, consumer-focused advisory group designed to help ensure the consumer’s voice is heard in the decision-making across the consumer product lifecycle.
Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a leading financial services company that has approximately $1.9 trillion in assets, proudly serves one in three U.S. households and more than 10% of small businesses in the U.S., and is a leading middle market banking provider in the U.S. We provide a diversified set of banking, investment and mortgage products and services, as well as consumer and commercial finance, through our four reportable operating segments: Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth & Investment Management. Wells Fargo ranked No. 41 on Fortune’s 2022 rankings of America’s largest corporations. In the communities we serve, the company focuses its social impact on building a sustainable, inclusive future for all by supporting housing affordability, small business growth, financial health, and a low-carbon economy.
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