Wells Fargo to Pay $1 Billion to Settle Risk Management Claims -- 3rd Update
April 20 2018 - 11:30AM
Dow Jones News
By Yuka Hayashi
WASHINGTON -- Wells Fargo & Co. agreed to pay $1 billion to
settle federal claims of misconduct in its auto and mortgage
lending businesses.
The settlement with the Consumer Financial Protection Bureau and
Office of the Comptroller of the Currency concerned the bank's
failures to catch and prevent problems, including improper charges
to consumers in its mortgage and auto-lending businesses.
The fine is the largest against a bank so far in the Trump
administration and a signal that while officials are working to
ease postcrisis regulatory rules they won't let companies off the
hook for misconduct.
"We have said all along that we will enforce the law. That is
what we did here," CFPB acting director Mick Mulvaney said in a
statement.
As part of the settlement, the bank also agreed to offer
restitution to customers and improve risk and compliance management
practices.
"The OCC took these actions given the severity of the
deficiencies and violations of law, the financial harm to
consumers, and the bank's failure to correct the deficiencies and
violations in a timely manner," the OCC said in its release
detailing the settlement.
The regulator added that it "found deficiencies in the bank's
enterprisewide compliance risk management program that constituted
reckless, unsafe or unsound practices."
The settlement covers the bank's practices in two main areas:
charging improper fees for rate-lock extensions in mortgage lending
and selling unwanted insurance products to auto-loan customers.
"While we have more work to do, these orders affirm that we
share the same priorities with our regulators and that we are
committed to working with them as we deliver our commitments," said
Timothy J. Sloan, president and chief executive officer of Wells
Fargo.
The settlement is the latest in a series of regulatory woes for
the San Francisco-based bank. It has faced a number of regulatory
problems in recent years, including regulatory scrutiny of illegal
sales practices that involved the opening of as many as 3.5 million
accounts without customers' consent. Regulators have since probed
the bank's practices in auto lending, mortgages, wealth and
investment management and foreign exchange.
Wells Fargo restated its first-quarter earnings, lowering its
net income to $4.7 billion, or 96 cents a diluted share, a
reduction of $800 million, or 16 cents a diluted share, from
previously reported figures.
Wells Fargo disclosed last week that the regulators had offered
to resolve civil investigations for $1 billion.
Friday's announcement is one of several recent regulatory
actions against the bank. In February, the Federal Reserve took an
unprecedented enforcement action that barred the bank from growing
past the $1.95 trillion in assets it had at the end of 2017. The
Fed cited "widespread consumer abuses" in its rebuke.
In 2016, the regulators levied a $185 million fine after finding
the San Francisco-based bank had opened as many as 3.5 million
accounts without customers' knowledge or consent.
Banking regulators in mid-2017 downgraded one part of a secret
assessment of Wells Fargo's health and strength related to its risk
management, The Wall Street Journal reported in January.
The assessment -- known as a CAMELS score -- ranks a firm on
measures including capital, management and liquidity. The scores
can affect the level of insurance payments a bank must make as well
as the level of regulatory oversight of a firm.
Wells Fargo and the OCC have negotiated for months over how the
firm assesses risks and over a potential settlement, the Journal
has reported. The OCC also sent the bank's board a letter in
November about these issues.
The company in recent months hired a consultant to try to revamp
its procedures and revisited structural changes made in response to
the sales-practices scandal.
The bank also said its chief risk officer Mike Loughlin would
retire and that it will hire someone to replace him in the next few
months. The bank hasn't named a replacement but has been
interviewing outside candidates, people familiar with the process
said.
In late January, Wells Fargo appointed former Federal Reserve
Bank of New York official Sarah Dahlgren to oversee regulatory
relations for its corporate risk group.
The Journal reported in March that four top risk management
executives would be retiring from Wells Fargo in the coming
weeks.
--Emily Glazer and Ryan Tracy contributed to this article.
Write to Yuka Hayashi at yuka.hayashi@wsj.com
(END) Dow Jones Newswires
April 20, 2018 11:15 ET (15:15 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Aug 2024 to Sep 2024
Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Sep 2023 to Sep 2024