Wells Fargo to pay $3B to settle fake customer account scam

Andrew Cummings
February 25, 2020

The payment will resolve criminal and civil liability from the fake accounts scandal, which took place between 2002 to 2016, the Department of Justice said in a statement.

Waters has scheduled three hearings next month on "holding Wells Fargo accountable".

Since the fake-accounts scandal was revealed in 2016, the San Francisco-based bank has paid out billions in fines to state and federal regulators, reshuffled its board of directors and seen two CEOs and other top-level executives leave the company.

Charlie Scharf, who became chief executive in October, said the settlement was a "significant step in bringing this chapter to a close". "Our customers, shareholders and employees deserved more from the leadership of this Company". The money is included in the $3 billion settlement total.

This settlement only pertains to the bank - no protections are extended to current or former employees or executives who may have been implicated in the scandal. And in the agreement Wells Fargo admits that senior executives were aware of the illegal activity long ago.

Wells' sales policies, pushed by top management, were aggressive and proved to be unrealistic.

The agreement was reached with the bank itself, not with any individuals responsible for the fraud.

"When companies cheat to compete, they harm customers and other competitors", Deputy Assistant Attorney General Michael Granston said in a statement.

Community Reinvestment Act (CRA) rating: Even if Wells Fargo's asset cap is lifted, its growth could still be hampered by its CRA rating, which assesses how well banks service poorer communities.

The mortgage and auto loan claims are not part of Friday's deal, and Justice Department officials declined to comment on whether they meant to take more action against the bank. Probes into allegations at other businesses are continuing. "This is sad and hard for me to say, but I had less stress in the 1991 Gulf War than working for Wells Fargo". "To make matters worse, frontline employees like us were unfairly scapegoated for trying to meet intense sales pressures".

Wells Fargo & Co WFC.N has racked up well over $7 billion in penalties since a sales practices scandal erupted in 2016, and continues to face headwinds.

Last month, former chief executive John Stumpf agreed to pay $17.5m to settle charges, in a rare example of a bank executive being personally punished for failing to stop misconduct.

The $3 billion penalty is appropriate, "given the staggering size, scope and duration of Wells Fargo's illicit conduct", added Andrew Murray, U.S. Attorney for the Western District of North Carolina.

Since 2016, the bank has battled a laundry list of legal troubles, including creating fake accounts, forcing customers into auto insurance purchases they didn't need, overcharging customers, and charging them mortgage fees they didn't deserve. The orders also require Wells Fargo to repay customers for costs associated with its consumer abuses.

Wells Fargo's stock, once a favorite in the banking industry, has fallen badly out of favor. Carrie Tolstedt held those positions during that time period. Banking rivals JPMorgan Chase (JPM) and Bank of America (BAC) have more than doubled in value.

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