Wells Fargo was hit with a massive $3.7B penalty from the CFPB over a series of problems involving auto loans, mortgages, checking accounts, and more. In total, 1600 million accounts were affected. Of that amount, $2B will go to impacted customers as compensation, and $1.7B will be paid to the CFPB as a fine.
The specific issues were as follows:
- System errors with auto loans and mortgages caused payment problems, resulting in extra fees and interest being charged
- Mortgage modifications were denied
- Incorrect overdraft fees were charged on debit card transactions and ATM withdrawals
- Accounts were frozen without cause, and fee waivers were not successfully applied
- 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.
If you have a checking/savings account with Wells Fargo, or if you have an auto loan or mortgage with them, it’s worth keeping an eye on updates. There should eventually be compensation.