Wells Fargo Bank, N.A., has reached a $1 billion settlement with the Consumer Financial Protection Bureau (“CFPB”) and the Office of the Comptroller of the Currency (“OCC”).
The settlement resolved the CFPB's allegations that Wells Fargo violated the Consumer Financial Protection Act (“CFPA”) in the way it administered a mandatory insurance program related to its auto loans and charged certain borrowers for mortgage interest rate-lock extensions.
Under the terms of the consent orders, Wells Fargo will remediate harmed consumers and undertake certain activities related to its risk management and compliance management. The CFPB assessed a $1 billion penalty against the bank and credited a $500 million penalty collected by the OCC toward the satisfaction of its fine.
In imposing the $500 million penalty on Wells Fargo, the OCC found deficiencies in the bank's enterprise-wide compliance risk management program that constituted reckless, unsafe, or unsound practices and resulted in violations of the unfair practices prong of Section 5 of the Federal Trade Commission (“FTC”) Act. In addition, the agency found the bank violated the FTC Act and engaged in unsafe and unsound practices relating to improper placement and maintenance of collateral protection insurance policies on auto loan accounts and improper fees associated with interest rate lock extensions. These practices resulted in consumer harm which the OCC has directed the bank to remediate.
The OCC said that the $500 million civil money penalty reflected a number of factors, including the bank's failure to develop and implement an effective enterprise risk management program to detect and prevent the unsafe or unsound practices, and the scope and duration of the practices.
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Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].