One top of other fines and a harsh Federal Reserve penalty, Wells Fargo now faces the prospect of federal sanctions.Already disciplined for a series of misdeeds involving its consumer lending practices, beleaguered banking giant Wells Fargo now faces even more federal sanctions. According to Reuters, the bank may soon be hit with a fine stemming from charging its auto insurance customers for duplicate car insurance.
The Office of the Comptroller of the Currency (OCC) is currently reviewing whether bank executives were aware of the auto insurance mix-up and could have stepped in sooner to correct the matter. At the same time, the Consumer Financial Protection Bureau (CFPB) has reportedly mulled a lawsuit against the bank over unauthorized changes to mortgage loans that increased its customers’ overall payments. Reuters noted that the OCC and CFPB’s actions could be rolled into a single penalty.
CEO Responds to Sanction Report
In remarks delivered to the Detroit Economic Club on March 15, Wells Fargo CEO Tim Sloan said that he could not verify the report regarding possible sanctions, but he did acknowledge lapses related to the car insurance controversy. “We made some mistakes in terms of when we required our customers to have insurance on their vehicles when they weren’t otherwise providing it,” he said.
When making a car loan, Wells Fargo requires borrowers to hold auto insurance. If not, the bank’s insurance partner, National General Insurance, would add a policy to their account. A report in the New York Times, however, revealed that as many as 800,000 customers were charged for a policy by National General despite the fact that they were already covered by another insurer.
The bank originally estimated that it would need to repay the wrongly charged customers a total of $80 million, but its own investigation of the misconduct, which dated as far back as 2005, found that it may be on the hook for a much higher tally. It now calculates the full refund amount at $145 million, with another $37 million tacked on due to adjustments to account balances.
Prior to the report of possible sanctions, Wells Fargo was dealt one of the harshest penalties ever handed down by the Federal Reserve, which restricted the bank’s asset holdings to $1.95 trillion for the remainder of 2018. The Fed’s move essentially halts the bank’s growth for this year. Wells Fargo was also ordered to strengthen its risk management practices.
More trouble for the bank still looms on the horizon. The Wall Street Journal reported that the Justice Department and Securities and Exchange Commission had launched investigations into possible transgressions in its wealth management business involving fee overcharges and improprieties related to 401(k) rollovers.
In a securities filing, the bank said that it had undertaken its own review of its wealth management practices. Sloan noted in a press release that the bank was “committed to a thorough review of many processes,” adding, “when we discover a problem, we are moving to find the root cause and fix it.”Massachusetts is also looking into the matter, according to a report in ThinkAdvisor. The state’s top securities official, Commonwealth Secretary William Galvin, referenced another of the bank’s scandals — the opening of accounts without customer knowledge — as the impetus for his current investigation.