new York The US bank Wells Fargo has to pay again because of its customer service scandals. This time, the San Francisco-based bank agreed with the US regulator Consumer Financial Protection Bureau (CFPB) to pay a total of $3.7 billion for consumer credit violations.
“Wells Fargo’s repeated violations of the law have endangered millions of American families,” said Rohit Chopra, director of the consumer protection agency CFPB. Among other things, she accuses Wells Fargo of collecting illegal fees on car and home loans for years and of having unfairly reclaimed cars. In addition, the bank charged savings and checking accounts with unlawful overdraft interest and other illegal debits.
Wells Fargo will pay over $2.0 billion in the settlement to compensate more than 16 million customers. The CFPB also imposed a record $1.7 billion in fines, Chopra said.
US President Joe Biden had appointed him director of the agency. Chopra promised to give American consumers more protection from banks and insurers.
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With the settlement, Wells Fargo and the regulator settle a dispute that has raged for years. According to the bank, the agreement will result in an operating loss of $3.5 billion on the books in the fourth quarter. That equates to $2.8 billion after taxes. The bank only set aside two billion dollars in October, which has already been taken as a sign that an agreement could soon be reached.
“This far-reaching settlement is an important milestone in our work to transform our working practices at Wells Fargo and get these issues behind us,” said the bank’s chief executive officer, Charles Scharf, who has led the bank since 2019. “We and the regulators have identified a number of unacceptable practices that we have worked on systematically to change and provide remediation for clients where warranted.”
Wells Fargo has experience with penalties and sanctions
Wells Fargo has been under pressure for years because of a series of scandals. The financial group has already paid a number of sensitive penalties and sanctions. The focus was initially on an affair about fictional accounts.
To meet management’s ambitious goals, employees had opened bank and credit card accounts on a large scale in their customers’ names for years without their knowledge. According to a Harvard Business School study, a total of 3.5 million of these made-up accounts existed. However, the system was blown, and the then CEO John Stumpf had to resign in 2016 and is still not allowed to work for any bank.
However, as the recent settlement shows, even after the fake customer scandal, the bank has been trying to exploit its customers for its own benefit. Reports of the intimidation of whistleblowers who denounced the bank’s abuses also made the rounds. Even if many observers praise the work of the current CEO, Scharf, trust in the bank’s corporate culture has been permanently damaged by the many scandals and cover-up attempts.
Warren Buffett has divested himself of stocks
Unlike Wall Street banks, Wells Fargo has a strong presence in rural areas of the United States and relies heavily on retail and small business banking rather than investment banking. But as the most recent scandal shows, the bank has probably not always done so to the advantage of customers.
Star investor Warren Buffett, who had been loyal to the big bank from California for decades, also lost patience after the turbulence. In light of the bank’s ongoing problems, he sold his Wells Fargo shares entirely this year.
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