- CFPB stance is said to reflect frustration with repeat abuses
- Firm previously said it’s in talks to settle variety of probes
Wells Fargo & Co. is under pressure from the Consumer Financial Protection Bureau to pay more than $1 billion to settle a series of investigations into mistreatment of customers, a deal that would shatter the agency’s previous record — also with Wells Fargo.
The regulator’s demand in confidential talks, described by people with direct knowledge of the matter, reflects its escalating frustration with the bank, which has been punished multiple times by authorities over the past six years for a variety of past abuses. In March, CFPB Director Rohit Chopra vowed to ratchet up sanctions on large, repeat offenders, potentially even limiting their ability to engage in certain businesses.
The latest talks with the CFPB span automobile lending, consumer-deposit accounts and mortgage lending, Wells Fargo said in a filing this week, without gauging the size of the potential payment. The bank set aside $2 billion in the third quarter to cover a variety of regulatory and legal issues, including making harmed customers whole. The figures discussed by negotiators in the CFPB talks are around $1 billion, the people said.
Spokespeople for the regulator and bank declined to comment.
Under Chief Executive Officer Charlie Scharf, Wells Fargo has been trying to resolve a slew of scandals that erupted in 2016 with the revelation that the bank opened millions of bogus accounts. Problems surfaced across business lines, resulting in the ousters of two CEOs and a number of costly penalties including the Federal Reserve’s decision to cap the bank’s assets. Scharf warned in October that the charge in the third quarter “isn’t the end of it.”
An accord with the CFPB isn’t imminent, nor is one likely to be announced this month, the people said, asking not to be named because the discussions are private. Chopra has vowed to make punishments of large firms more painful, and the agency may ultimately seek restrictions on the bank’s businesses or other changes in addition to a financial penalty, some of the people said.
Wells Fargo aims to resolve as many of the agency’s concerns simultaneously as possible, which could offer some relief to shareholders. The talks could also stall.
The CFPB’s punishments of the bank have been notching higher for years.
In 2016, the agency fined the firm $100 million for opening accounts without customers’ permission. In 2018, the agency imposed a $1 billion sanction for additional misconduct, but gave the bank a $500 million credit for a concurrent settlement with the Office of the Comptroller of the Currency.
Measured against the portion that the CFPB collected, a sanction surpassing $1 billion would more than double the old amount — though the agency would probably use $1 billion as the prior benchmark.
Chopra, appointed by President Joe Biden, is under pressure from progressives in the Democratic party to reinvigorate the consumer watchdog, which they say pulled back from tougher policy making and enforcement under Republican President Donald Trump.
“Corporate recidivism has become normalized and calculated as the cost of doing business,” Chopra said in March.
“We must forcefully address repeat lawbreakers to alter company behavior and ensure companies realize it is cheaper, and better for their bottom line, to obey the law than to break it.”
By Bloomberg
