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TH E M R EP O RT | 61 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT Wells Fargo to Pay $3.7B as Part of CFPB Agreement "This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us," said Charlie Scharf, Wells Fargo's CEO. T he Consumer Finan- cial Protection Bureau (CFPB) has reached a final agreement with Wells Fargo, which has been or- dered to pay $3.7 billion for the widespread and systemic abuse of customers through misap- plied loan payments, wrongfully seized homes and vehicles, add- ing extraneous fees or incor- rectly applying interest rates which resulted in losses for over 16 million consumer accounts. The total judgment amount consists of a $1.7 billion civil fine and $2 billion to consumers hurt by Wells Fargo. The fine will go to the CFPB's Civil Penalty Fund, where it will be used to provide relief to victims of consumer financial law violations. Of the $2 billion in restitution, $1.3 bil- lion will go toward auto lending accounts, $500 million to de- posit accounts, and $200 million to mortgage accounts. "Wells Fargo's rinse-repeat cycle of violating the law has harmed millions of American families," CFPB Director Rohit Chopra said. "The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender." The CFPB's specific findings include that Wells Fargo: » Unlawfully repossessed vehicles and bungled bor rower accounts: Wells Fargo had systematic failures in its servicing of automobile loans that resulted in $1.3 billion in harm across more than 11 million accounts. The bank incorrectly applied borrowers' payments, improperly charged fees and interest, and wrong- fully repossessed borrowers' vehicles. In addition, the bank failed to ensure that borrowers received a refund for certain fees on add-on products when a loan ended early. » Improperly denied mortgage modifications: During at least a seven-year period, the bank improperly denied thousands of mortgage loan modifications, which in some cases led to Wells Fargo customers losing their homes to wrongful foreclo- sures. The bank was aware of the problem for years before it ultimately addressed the issue. » Illegally charged surprise overdraft fees: For years, Wells Fargo unfairly charged surprise overdraft fees—fees charged even though consumers had enough money in their account to cover the transaction at the time the bank authorized it—on debit card transactions and ATM withdrawals. As early as 2015, the CFPB, as well as other federal regulators, includ- ing the Federal Reserve, began cautioning financial institutions against this practice, known as authorized positive fees. » Unlawfully froze consumer accounts and mispresented fee waivers: The bank froze more than 1 million consumer ac- counts based on a faulty auto- mated filter's determination that there may have been a fraudu- lent deposit, even when it could have taken other actions that would have not harmed customers. Customers affected by these account freezes were unable to access any of their money in accounts at the bank for an average of at least two weeks. The bank also made deceptive claims as to the availability of waivers for a monthly service fee. The agreement also forces Wells Fargo to immediately stop charging surprise overdraft fees and ensure that the unused portion of GAP insurance contracts is refunded to the borrower when a loan is paid off or otherwise terminates prematurely. The CFPB also calls Wells Fargo a "repeat offender" as they have been the subject of multiple enforcement actions in the past for other violations including faulty student loan servicing, mortgage kickbacks, fake accounts, and harmful auto loan practices. In a prepared statement issued after the deal was announced, Wells Fargo said that current leadership has made "significant progress to transform Wells Fargo." "As we have said before, we and our regulators have identified a series of unacceptable practices that we have been working systematical- ly to change and provide customer remediation where warranted. This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us," said Charlie Scharf, Wells Fargo's CEO. "Our top prior- ity is to continue to build a risk and control infrastructure that reflects the size and complexity of Wells Fargo and run the company in a more controlled, disciplined way." "We have made significant prog- ress over the last three years and are a different company today," Scharf said. "We remain commit- ted to doing the right thing for our customers and working closely with our regulators and others to deal appropriately with any issue that arises."