After a number of scandal-ridden years, the fourth-largest bank in the U.S. is looking for a fresh start after being ordered to pay $3.7 billion by the Consumer Financial Protection Bureau earlier this week.
The payment, which will include a $1.7 billion fine and $2 billion in restitution to affected customers, will settle long-running accusations of "widespread mismanagement" that led to everything from incorrectly-charged interest to wrongfully possessed customer cars and foreclosed-upon homes.
"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," CEO Charles Scharf said in a statement Wells Fargo provided to TheStreet. "We have made significant progress over the last three years and are a different company today."
While the sheer size of the settlement dominated the news cycle, CFPB is far from the only one investigating or trying to sue Wells Fargo. In 2018, Wells Fargo had already been ordered to pay $1 billion for similar home and auto loan mismanagement accusations.
In September 2022, the banking giant agreed to pay $145,000 to close a Department of Labor investigation into malpractice related to 401k accounts.
One Major Fine and a Smaller Lawsuit Avoided
One of the most significant scandal milestones took place in 2012, when Wells Fargo agreed to pay $175 million to settle Justice Department accusations of giving certain Black and Latino borrowers higher rates and subprime loans during the 2007-2008 financial crisis.
The aftershock of that investigation still occasionally spills over as different local and class-action lawsuits -- earlier this week, a federal judge in Illinois issued a summary judgment over a mortgage discrimination case put forward by the largest county in the state.
The news was largely lost amid the CFBP fine coverage but the ruling, which was first reported by Law360, allows Wells Fargo to avoid another high-profile lawsuit in which the requested payment was $300 million.
"The county is correct that statistical disparities may be used to establish disparate treatment, especially where no other explanation for an observed disparity is present," U.S. District Judge Gary Feinerman wrote in a ruling that ultimately found the county did not provide enough evidence to prove its claims. “The county’s problem, however, is that its evidence for these disparities [...] has been excluded."
Can Wells Fargo Finally Turn a New Leaf?
Wells Fargo expressed support for the decision and echoed similar statements about how it will work to rebuild customer trust.
"Wells Fargo is pleased with this decision, which found that the county's claims regarding our lending practices were unfounded," a Wells Fargo spokesperson told TheStreet in a statement. The bank further said that it plans to "continue to focus on helping customers succeed financially and expanding homeownership opportunities."
It is understandable that Wells Fargo wants to move on from past scandals and craft a new image -- amid news of the CFPB payment, stock was down 2.12% to $40.25 on Thursday afternoon and is down more than 16% annually.
But many of the accusations are so long-running and far-reaching that it is unlikely that past problems will be forgotten. One lawmaker who is keeping her foot on the accountability gas with Wells Fargo is Elizabeth Warren (D-Mass.) In October, the senator published a long report accusing the bank of "rampant fraud and theft" through the instant payment transfer service Zelle.
"I've said it once, and I'll say it again: We need to break up Wells Fargo," Warren said in a Twitter post immediately after the CFPB payment was announced.
