We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Wells Fargo (WFC) Fined $3.7B by CFPB for Harming Consumers
Read MoreHide Full Article
Wells Fargo & Company (WFC - Free Report) has been ordered by the Consumer Financial Protection Bureau (“CFPB”) to pay more than $2 billion in redress to consumers and a $1.7-billion civil penalty for the widespread mismanagement of auto loans, mortgages and deposit accounts.
Per the enforcement action, Wells Fargo has harmed millions of consumers for several years. The bank had systematic failures in its servicing of automobile loans that resulted in $1.3 billion in harm across more than 11 million accounts. It incorrectly applied borrowers’ payments, improperly charged fees and interest, and wrongfully repossessed borrowers’ vehicles.
Also, during at least a seven-year period, WFC improperly denied thousands of mortgage loan modifications, which led to its customers losing their homes to wrongful foreclosures.
In addition to these, Wells Fargo has been unfairly charging surprise overdraft fees on debit card transactions and ATM withdrawals for years. The bank unlawfully froze consumer accounts and mispresented fee waivers, because of which, affected customers were unable to access any of their money in accounts at the bank for an average of at least two weeks.
Per the CFPB’s order, Wells Fargo will pay redress to more than 16 million affected consumer accounts. The $1.7-billion fine will go to the CFPB’s civil penalty fund, where it will be used to provide relief to victims of consumer financial law violations.
The CFPB’s director, Rohit Chopra, said, “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.”
Chopra also mentioned, “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. Wells Fargo has consistently been one of the most problematic repeat offenders of the banks and credit unions we supervise. Finding a permanent resolution to this bank’s pattern of unlawful behavior is a top priority.”
Nevertheless, as a relief, Wells Fargo has taken several steps to address regulatory concerns, including strengthening its risk and control infrastructure since the appointment of Charlie Scharf as the CEO of the company in October 2019.
Scharf said, “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. 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.”
Thus, while WFC still has a long list of pending legal cases and remains under close supervision of the regulatory authorities, the steps taken by the company to transform the way it operates should provide some respite.
Moreover, Wells Fargo’s prudent expense management initiatives continue to support its financial. The company is focused on reducing its expense base by streamlining organizational structure, closing branches, and reducing headcount by optimizing operations and other back-office teams. Such efforts are likely to support bottom-line growth.
Over the past six months, shares of WFC have gained 6.2% compared with the industry’s growth of 2%.
This October, Bank of America (BAC - Free Report) agreed to pay $1.84 billion to resolve claims by Ambac Financial, a bond insurer, regarding residential mortgage-backed securities. Ambac claimed that between 2004 and 2006, it insured certain mortgage-backed securities backed by poorly underwritten Countrywide Financial loans. Countrywide is a lender whom BofA acquired in 2008.
Countrywide’s purchase put BofA at the center of years of litigation over who was to blame for a mortgage-market meltdown.
In a separate case, Goldman Sachs Group Inc.’s (GS - Free Report) asset-management arm agreed to pay $4 million to settle the Securities and Exchange Commission’s claims that Goldman Sachs Asset Management, L.P. failed to follow policies and procedures for certain environmental, social and governance (ESG) investment products.
The SEC uncovered procedural failures involving the ESG research used to select and monitor securities from April 2017 to February 2020. The company did not have written policies from April 2017 until June 2018 for ESG research in one product. Even when such policies and procedures were established, it was not consistently followed until February 2020.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Wells Fargo (WFC) Fined $3.7B by CFPB for Harming Consumers
Wells Fargo & Company (WFC - Free Report) has been ordered by the Consumer Financial Protection Bureau (“CFPB”) to pay more than $2 billion in redress to consumers and a $1.7-billion civil penalty for the widespread mismanagement of auto loans, mortgages and deposit accounts.
Per the enforcement action, Wells Fargo has harmed millions of consumers for several years. The bank had systematic failures in its servicing of automobile loans that resulted in $1.3 billion in harm across more than 11 million accounts. It incorrectly applied borrowers’ payments, improperly charged fees and interest, and wrongfully repossessed borrowers’ vehicles.
Also, during at least a seven-year period, WFC improperly denied thousands of mortgage loan modifications, which led to its customers losing their homes to wrongful foreclosures.
In addition to these, Wells Fargo has been unfairly charging surprise overdraft fees on debit card transactions and ATM withdrawals for years. The bank unlawfully froze consumer accounts and mispresented fee waivers, because of which, affected customers were unable to access any of their money in accounts at the bank for an average of at least two weeks.
Per the CFPB’s order, Wells Fargo will pay redress to more than 16 million affected consumer accounts. The $1.7-billion fine will go to the CFPB’s civil penalty fund, where it will be used to provide relief to victims of consumer financial law violations.
The CFPB’s director, Rohit Chopra, said, “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.”
Chopra also mentioned, “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. Wells Fargo has consistently been one of the most problematic repeat offenders of the banks and credit unions we supervise. Finding a permanent resolution to this bank’s pattern of unlawful behavior is a top priority.”
Nevertheless, as a relief, Wells Fargo has taken several steps to address regulatory concerns, including strengthening its risk and control infrastructure since the appointment of Charlie Scharf as the CEO of the company in October 2019.
Scharf said, “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. 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.”
Thus, while WFC still has a long list of pending legal cases and remains under close supervision of the regulatory authorities, the steps taken by the company to transform the way it operates should provide some respite.
Moreover, Wells Fargo’s prudent expense management initiatives continue to support its financial. The company is focused on reducing its expense base by streamlining organizational structure, closing branches, and reducing headcount by optimizing operations and other back-office teams. Such efforts are likely to support bottom-line growth.
Over the past six months, shares of WFC have gained 6.2% compared with the industry’s growth of 2%.
Image Source: Zacks Investment Research
Currently, WFC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Financial Misconduct by Other Firms
This October, Bank of America (BAC - Free Report) agreed to pay $1.84 billion to resolve claims by Ambac Financial, a bond insurer, regarding residential mortgage-backed securities. Ambac claimed that between 2004 and 2006, it insured certain mortgage-backed securities backed by poorly underwritten Countrywide Financial loans. Countrywide is a lender whom BofA acquired in 2008.
Countrywide’s purchase put BofA at the center of years of litigation over who was to blame for a mortgage-market meltdown.
In a separate case, Goldman Sachs Group Inc.’s (GS - Free Report) asset-management arm agreed to pay $4 million to settle the Securities and Exchange Commission’s claims that Goldman Sachs Asset Management, L.P. failed to follow policies and procedures for certain environmental, social and governance (ESG) investment products.
The SEC uncovered procedural failures involving the ESG research used to select and monitor securities from April 2017 to February 2020. The company did not have written policies from April 2017 until June 2018 for ESG research in one product. Even when such policies and procedures were established, it was not consistently followed until February 2020.