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Catch of the Week – Wells Fargo Pays $3 Billion, and another $35 Million, in Latest in Long Line of Government Enforcement Actions against the Bank

Posted  February 28, 2020

On February 21, 2020 the Department of Justice announced that Wells Fargo & Co. agreed to pay $3 billion to resolve civil and criminal allegations that Wells Fargo’s “cross-selling” practices led to millions of accounts being opened for customers under false pretenses and without consent. These practices allegedly led to Wells Fargo collecting millions of dollars in fees.

Less than one week later, two of bank’s brokerage divisions, including the Wells Fargo Advisors Financial Network, agreed to pay a $35 million SEC penalty to resolve charges that their financial professionals made unsuitable recommendations for single-inverse ETF products, without understanding the risks associated with those products, which can expose investors to large and unexpected losses.  The SEC also charged that Wells Fargo failed to adequately supervise or train its financial professionals.

Wells Fargo’s Cross-Selling Practices

According to DOJ, between 2002 and 2016, Wells Fargo allegedly pressured its employees to meet unrealistic sales goals, which in turn led the employees to create millions of accounts for customers under false pretenses or without the customers’ consent. The employees allegedly would falsify records or misuse customer identifications to create the accounts or products. In its settlement with DOJ, Wells Fargo admitted that it collected millions of dollars in fees from these improper accounts and products. $500 million of the settlement was to resolve allegations from the SEC that Wells Fargo misled its investors about the success of its business in part based on touting the success of the “cross-selling” improper accounts and products.

U.S. Attorney Andrew Murray for the Western District of North Carolina noted that the settlement went “far beyond ‘the cost of doing business,’” but said it was “appropriate given the staggering size, scope and duration of Wells Fargo’s illicit conduct, which spanned well over a decade. When a reputable institution like Wells Fargo caves to the pernicious forces of greed, and puts its own interests ahead of those of the customers it claims to serve, my office will not sit idle.  Today’s announcement should serve as a stark reminder that no institution is too big, too powerful, or too well-known to be held accountable and face enforcement action for its wrongdoings.”

This Month’s Actions against Wells Fargo are the Latest in a Long Line of Enforcement Actions

The two settlements with Wells Fargo this month add to the long list of enforcement actions against Wells Fargo entities over the last four years. Combined, the most significant enforcement actions total over $8 billion.

      • April 20, 2018 – In a joint action by the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, Wells Fargo agreed to pay a $1 billion penalty to resolve charges arising from its administration of a mandatory insurance program related to its auto loans, and charges arising from how it charged certain borrowers for mortgage interest rate-lock extensions.
      • August 1, 2018 – Wells Fargo agreed to $2.09 billion settlement with DOJ to settle allegations that it knowingly misrepresented the quality of its mortgage loans to investors, in violation of FIRREA, in order to double its production of subprime and Alt-A loans.
      • April 8, 2016 – Wells Fargo agreed to pay $1.2 billion in connection with the bank’s improper mortgage lending practices, admitting that it fraudulently certified loans as eligible for FHA mortgage insurance.
      • December 28, 2018 – Wells Fargo reached a $575 million settlement with all 50 states and DC regarding the same cross-selling practices at issue in the current federal settlement.
      • September 8, 2016 – Wells Fargo was fined $100 million by the CFPB with respect to the same unauthorized account-opening practices at issue here, and also agreed to a $35 million OCC penalty and a $50 million settlement with the City and County of Los Angeles.
      • March 11, 2019 – Wells Fargo entities were among the investment advisors settling charges that they placed clients in higher-cost mutual fund share classes in order to receive a share of the higher 12-b1 fees charged on those investments. Wells Fargo entities were ordered to return $17.4 million to harmed investors.
      • November 8, 2019 – Wells Fargo Bank, N.A. agreed to pay $14.475 million in a settlement with CFTC related to the bank’s actions in a single 2014 FX forward contract trade.
      • January 2, 2019 – In another action based on improper sales practices that resulted in consumers being signed up for products without their consent, Wells Fargo agreed to pay $10 million in a settlement with the California Department of Insurance resolving allegations that Wells Fargo signed approximately 1,500 customers up for insurance without their consent. The company also agreed to exit the personal insurance business in California.

The large amount of the various settlements combined with the variety in alleged wrongdoing earn Wells Fargo a place in our Catch of the Week Hall of Shame. While the DOJ press release describes Wells Fargo’s conduct as if it were an isolated instance of “caving” by a “reputable institution,” this long list of misconduct by Wells Fargo paints a very different picture indeed.

It seems clear that continued vigilance and continued enforcement efforts by DOJ, the SEC, and other enforcement agencies is required, with respect to Wells Fargo particularly, but also with respect to any bank that uses improper practices to increase revenues, mislead customers, or misrepresent their successes to their investors.

In all such enforcement efforts, whistleblowers can play a vital role, bringing forth insider knowledge of wrongdoing.  Whistleblowers hold serial wrongdoers accountable, and protect consumers, investors, and taxpayers.

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Tagged in: Catch of the Week, Financial and Investment Fraud, Financial Institution Fraud, FIRREA, Importance of Whistleblowers,


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