Wells Fargo agreed Friday to pay $575 million to 50 states and the District of Columbia in a settlement tied to its problematic sales practices, mortgage rate-lock fees and add-on products for auto loans from 2002 through 2017.
About $150 million will go to affected individuals in California, which says the San Francisco-base bank “opened unauthorized accounts and enrolled customers in bank products to meet aggressive sales goals, as result of extreme management pressure, threat of job loss for branch employees, and an abusive company culture.”
Some of the troubled sales practices began attracting widespread headlines in 2016, though the media began covering the fraud in 2011. Wells Fargo Advisors has had a net loss of 1,012 registered reps since the fall of 2016. As of Sept. 30, its advisor headcount was 14,074 — down 490 from a year ago and 152 from the second quarter of 2018.
According to California Attorney General Becerra, “Instead of safeguarding its customers, Wells Fargo exploited them, signing them up for products — from bank accounts to insurance — that they never wanted. This is an incredible breach of trust that threatens … confidence in our banking system. As our investigation found, Wells Fargo’s conduct was unlawful and disgraceful.”
Wells Fargo opened more than 3.5 million unauthorized accounts and enrolled 528,000 customers in online billpay via improper sales practices, Becerra’s office says. The bank also enrolled some clients in renter and life-insurance policies that they did not authorized, and — from 2005 to 2016 — added collateral protection insurance or delayed cancellation of such insurance on millions of car loans.
“This agreement underscores our serious commitment to making things right in regard to past issues as we work to build a better bank,” Wells Fargo CEO and President Tim Sloan, explained in a statement.
As part of the agreement, Wells Fargo will
- Maintain designated teams to review and respond to client inquiries on issues covered in the settlement;
- Create and maintain a website that describes the issues and the bank’s remediation efforts, and identifies contact information for clients with questions or concerns; and
- Provide periodic reports to the states on the progress of its remediation efforts.
The bank accrued $400 million of the settlement amount by Sept. 30 and expects to accrue the remaining $175 million by Dec. 31.
It continues to be under the scrutiny of the Federal Reserve, which in February froze its growth until internal controls and management have improved. The Fed reaffirmed this measure earlier this month.
For more details, see When Will Wells Fargo’s Scandals End?