Wells Fargo (WFC) shares traded lower Tuesday after the bank was fined nearly $4 billion for its role in mismanaging consumer loans for more than 16 million customers.
The U.S. Consumer Financial Protection Bureau ordered Wells Fargo to pay more than $2 billion to in consumer redress, as well as a $1.7 billion civil penalty, for a series of actions including misapplied loan payments, improper home foreclosures, illegally repossessed vehicles and surprise overdraft fees.
The fine adds to a $3 billion payment made in 2020 to the U.S. Department of Justice and the Securities and Exchange Commission following accusations of fraud and illegal sales tactics related to the so-called 'fake account' scandal.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said CFPB Director Rohit Chopra. “The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”
Wells Fargo shares were marked 1.1% lower in early Tuesday to change hands at $41.35 each.
“As we have said before, we and our regulators have identified a series of unacceptable practices that we have been working systematically to change and provide customer remediation where warranted," said CEO Charlie Scharf. "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.”
Earlier this fall, Wells Fargo took a 45 cents per share hit to its third quarter bottom line due to what it called a "a variety of historical matters, including litigation, customer remediation, and regulatory matters."
The bank posted weaker-than-expected earnings of 85 cents per share, even as revenues rose 3.6% to $19.05 billion, as it set aside nearly $800 million in credit reserves to cover potential bad loans.
Earlier this summer, Bloomberg News reported that Wells Fargo is preparing to significantly reduce its once-leading mortgage business.
Bloomberg said the shift, which is expected to include big changes in the way it deals with outside mortgage originators, is likely to lead to Wells Fargo focusing its home lending business to existing customers.
The bank said in a statement that it's "evaluating the size of our mortgage business to adapt to a dramatically smaller originations market" while "continuing to look across the company to prioritize and best position us to serve our customers broadly.”
