Justice Muse

According to the press release, the CFPB found that Wells Fargo: (i) unlawfully repossessed vehicles and bungled borrower accounts; (ii) improperly denied mortgage modifications; (iii) illegally charged surprise overdraft fees; and (iv) unlawfully froze consumer accounts and misrepresented fee waivers.  CFPB Director Chopra was notably frustrated with Wells Fargo, stating “Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families.”

CFPB Director Chopra further noted that “While $3.7 billion may sound like a lot, the CFPB recognizes that this alone will not fix Wells Fargo’s fundamental problems. Over the past several years, Wells Fargo executives have taken steps to fix longstanding problems, but it is also clear that they are not making rapid progress. We are concerned that the bank’s product launches, growth initiatives, and other efforts to increase profits have delayed needed reform.”

Without commenting on the substance of the penalty or the underlying conduct itself, I will note that financial institutions should be on notice that the CFPB and other regulators are serious about penalizing companies that continue to emerge as bad actors.  Hopefully, this will serve as a cautionary tale about taking a regulator’s past enforcement action seriously and making rapid progress (in the words of the CFPB) to address recognized issues. Also, other financial institutions should take note of the various areas raised in this announcement and assess whether these issues are also present within their own institutions.

A link to CFPB’s press release announcing the enforcement action is provided below.

https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-wells-fargo-to-pay-37-billion-for-widespread-mismanagement-of-auto-loans-mortgages-and-deposit-accounts/