Wells Fargo will pay $3 billion to settle criminal and civil charges in connection with the opening of millions of unauthorized customer accounts and has admitted to unlawful and unethical practices spanning 14 years, federal officials said Friday.
The fine from the Justice Department and the SEC is the latest in a series of actions the government has taken against the San Francisco-based lender for a raft of customer abuses uncovered since 2016. In September of that year, regulators first fined Wells Fargo for its aggressive sales goals that led thousands of its workers to illegally pad their numbers by opening fake accounts.
Wells Fargo workers across the country engaged in activities like transferring funds to unauthorized accounts, opening credit or debit cards without the customer’s knowledge — going so far as to create personal identification numbers — and fabricating email addresses for the accounts.
“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 customer’s private information,” Michael Granston, deputy assistant attorney general at the DOJ’s Civil Division, said in a press release.
Wells, long regarded as a solid, low-risk retail lender, has become a symbol of bank misbehavior in recent years. It has also been a target of bipartisan anger over actions ranging from charging hundreds of thousands of people for auto insurance they didn’t need to overcharging members of the military to refinance mortgages.
As part of Friday's settlement, the bank admitted that its employees engaged in fraud, identity theft and the falsification of bank records between 2002 and 2016.
“Wells Fargo admitted that it collected millions of dollars in fees and interest to which the Company was not entitled, harmed the credit ratings of certain customers, and unlawfully misused customers’ sensitive personal information, including customers’ means of identification,” according to the Justice Department release.
The department has agreed to defer prosecution of Wells Fargo -- the nation's fourth-largest bank -- for three years, in part because the firm admitted wrongdoing and because it has faced prior settlements from other government entities and overhauled its leadership.
Wells has had four different chief executives since the sales abuses first came to light; current CEO Charles Scharf has only held the job since October. All but three of the bank’s 14 board members have been at the bank for five years or less.
The scrutiny is far from over. The House Financial Services Committee announced Friday that it will hold three different hearings on Wells next month: a March 10 session with Scharf, a March 11 meeting with board members and a March 25 hearing on the bank’s sales practices — an extraordinary level of attention to a single institution.
Financial Services Chairwoman Maxine Waters (D-Calif.) ripped into the settlement agreement and had a warning for Wells Fargo.
The fine "is the cost of doing business for a bank with $1.9 trillion in assets." she said in a statement, adding that Wells must be "fully accountable to the public" for its actions.
“Despite today’s settlement, these hearings and the Committee’s investigation will make clear that the problems at Wells Fargo remain unresolved,” she said.
As part of the statement of facts, Wells acknowledged that it had misled its shareholders; $500 million of the fine announced Friday will be distributed by the SEC to investors.
“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 in a statement. “While today’s announcement is a significant step in bringing this chapter to a close, there’s still more work we must do to rebuild the trust we lost.”
Yet the settlement does not even involve the other consumer abuses that have been unearthed, including the unnecessary auto insurance charges and the military mortgage overcharges. It also does not address any potential charges against former executives.
The Office of the Comptroller of the Currency, which regulates national banks, last month charged multiple former top officials with a failure of leadership, saying that onetime CEO John Stumpf had agreed to pay a $17.5 million penalty and be barred for life from the banking industry.
And one of the most severe punishments on the bank's bottom line has gone unresolved: The Federal Reserve has forbidden Wells from growing any larger until it improves its ability to manage and communicate risks across the entire company.