Wells Fargo will pay $3 billion in penalties to resolve long-running investigations into consumer abuses that ran unchecked for more than a dozen years, costing the bank’s customers millions of dollars, federal prosecutors announced Friday.
The much-awaited settlement between the reputation-impaired bank and the Department of Justice is the largest yet in a slew of scandals that cost two Wells Fargo CEOs their jobs and generated billions of dollars in operating losses related to legal costs and government fines and settlements across all 50 states.
As part of the accords with entities including the Securities and Exchange Commission, Wells Fargo “admitted” it collected millions in fees and interest to which it wasn’t entitled, harming the credit ratings of some consumers and unlawfully misusing the personal information of others, the Justice Department said.
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The abusive practices persisted from 2002 to 2016, and had bank employees engaging in fraud, identify theft, falsifying records and forging signatures of existing clients to open unauthorized accounts.
The $3 billion fine being paid by Wells Fargo includes a $500 million civil penalty to be distributed to investors by the SEC.
“This settlement holds Wells Fargo accountable for tolerating fraudulent conduct that is remarkable both for its duration and scope, and for its blatant disregard of customers’ private information,” Michael Granston, a deputy assistant attorney in the Justice Department’s civil division, said in a statement.
The goal of the accord is to “ensure that there is an adequate and an additional deterrent component to this type of fraudulent conduct,” a senior Justice Department official said at a briefing for reporters Friday.
The nation’s fourth-largest bank has already paid billions in fines and penalties for pushing employees to create phony accounts to meet ambitious sales goals. It had reserved more than $3 billion for legal issues in the second half of 2019.
It was only last month that bank regulators imposed their largest fines ever on former Wells Fargo executives, including ex-CEO John Stumpf, for presiding over the San Francisco-based bank’s abusive sales practices.
The accords announced Friday are the latest move in work to repair the bank’s reputation by CEO Charlie Scharf, who took the helm in September and is reviewing operations in an attempt to turn the bank’s fortune’s around.
“The conduct at the core of today’s settlements — and the past culture that gave rise to it — are reprehensible and wholly inconsistent with the values on which Wells Fargo was built,” Scharf said Friday in a statement. “During the past three years, we’ve made fundamental changes to our business model, compensation programs, leadership and government.”
In addition to damaging the bank’s brand, the scandals have inflicted damage on Wells Fargo’s stock, with its shares down 12% in 2020, putting its market value below where it was when regulators announced the abuses more than three years ago.
Former CEO and veteran Wells Fargo executive Tim Sloan, who once denied that the phony accounts were a problem, resigned in March of last year after a punishing appearance before Congress.
Among other settlements, Wells Fargo has since paid more than $1 billion to regulators for mistreating consumers, $575 million to 50 states and the District of Columbia and $480 million for a class-action suit filed by investors.
The bank’s bad behavior became public knowledge in 2016 when Wells Fargo acknowledged it had opened millions of bank accounts in customers’ names without their knowledge. It also charged customers unnecessary fees for automobile and home loans, and sold some of them unrequested insurance products.
The public outcry over the bank’s handling of the scandal paved Stumpf’s exit. Wells Fargo then faced more bad press as other consumer abuses emerged dealing with its mortgage lending and auto insurance businesses.
Friday’s settlement, however, is not the final chapter in the saga, as Wells Fargo is operating under a growth cap on customer deposits imposed by the Federal Reserve, which has said it would not lift its restraints until the bank shows it has changed operations to prevent consumer abuses from happening again.
—CBS News’ Clare Hymes contributed to this report.
