Wells Fargo faces massive fines over lending, auto insurance abuses
10 April 2018
The US Consumer Financial Protection Bureau is considering fining Wells Fargo & Co hundreds of millions of dollars for its mortgage-lending and auto-insurance abuses, following up on a threat by President Donald Trump of aggressive action against the bank.
The agency is in talks with the San Francisco bank over penalties for the problems, Reuters reported on Monday, citing three unnamed people with knowledge of the plans. CFPB acting Director Mick Mulvaney is pushing for fines as large as $1 billion, Reuters said.
A CFPB spokesman did not immediately respond to requests for comment from media including The Los Angeles Times. A Wells Fargo spokeswoman declined to comment.
Mulvaney, the White House budget chief, has been critical of how aggressively the independent agency was run under the Obama administration.
But the large fines would align with Trump's public vow in December that Wells Fargo would face stiff penalties for charging fees to certain homebuyers to secure low mortgage rates. Trump said on Twitter that regulators would "make penalties severe" when companies are "caught cheating."
The penalty would be the first issued by Mulvaney, whom President Donald Trump tapped in November to head the CFPB.
The fine would fulfil Trump’s vow to come down hard on the country’s third-largest lender, which has been grappling with a sales practices scandal since September 2016.
The CFPB is readying sanctions alongside the Office of the Comptroller of the Currency (OCC), the day-to-day regulator for lenders such as Wells Fargo. The agencies are ready to sanction Wells Fargo for layering extra insurance on drivers and collecting commissions on those policies, Reuters reported last month.
Both agencies have also been investigating the bank for wrongly levying fees on mortgage borrowers.
Mulvaney is eyeing a penalty that would settle both those matters and dwarf the $100 million the CFPB fined Wells Fargo in September 2016 to settle its phony accounts scandal, said the sources familiar with the talks. That 2016 fine had been the CFPB’s largest ever.
Settlement terms have not been finalised but Mulvaney is pushing for a figure as high as $1 billion, said three people with knowledge of the discussions.
A stiff penalty against Wells Fargo could burnish Mulvaney’s image as a tough regulator even as his agency has dropped cases against at least two payday lenders.
Mulvaney has said the CFPB has gone too far in policing industry in the past but that abuses do exist.
“I think you’re being naïve if you think there aren’t folks out there who are breaking consumer financial protection laws,” Mulvaney told an industry meeting last month.
Lawmakers will get a chance to question Mulvaney about the settlement talks at two separate hearings in Congress on Wednesday and Thursday. Wells Fargo is due to report earnings on Friday and some officials hoped to have a deal by then.
Mulvaney was asked about the Wells Fargo matter at an industry event on Monday and declined to comment.
In the case of Wells Fargo and auto insurance, agency lawyers have raised concerns about how different customers received different treatment from the bank.
Drivers who financed a car through a dealer could be pushed into insurance if Wells Fargo suspected a policy had lapsed. Drivers who went directly to the bank for a loan were not subject to such “force-place” insurance after 2011, the bank has said.
The bank has also said it did not monitor insurance for borrowers with high credit scores. Borrowers with lower credit scores could get pushed into force-placed insurance.
Lawyers are debating whether the bank should pay a higher fine for the uneven treatment of customers, the sources said.
Trump had pledged tough penalties for Wells Fargo after Reuters reported in December that Mulvaney put the mortgage-lending abuse sanctions on ice.