Wells Fargo (WFC) Fined $250M by OCC, Winds Up 2016 CFPB Order
While Wells Fargo (WFC) 2016 CFPB consent order related to a retail sales practice expires, a banking regulator levies a $250-million fine on the bank...
Last week’s speculations of Wells Fargo & Company WFC reportedly experiencing setbacks in its regulatory remedial advancement materialized when the third-largest bank announced an unfavorable development related to the April 2018 Compliance Risk Management and Customer Remediation consent order.
A U.S. federal banking regulator — the Office of the Comptroller of the Currency (“OCC”) — has assessed a $250-million civil money penalty on Wells Fargo on the grounds of the former’s “unsafe or unsound practices” related to the home-lending loss mitigation program. With the failure of the program, which required the bank to repay customers who were charged excessive or improper fees, the company has violated the terms of the 2018 consent order that condemned its risk management systems.
In addition to the hefty fine, the company has been slapped with an enforcement action, with the OCC issuing a Cease and Desist Order to curb the bank’s future activities until ongoing mortgage servicing concerns are appropriately dealt with. The business restriction limits the bank from acquiring certain third-party residential mortgage servicing, while ensuring that borrowers are not transferred out of its loan portfolio until the remediation actions are executed.
The OCC order is based on the bank’s lacking efforts to establish an effective home lending loss mitigation program. The order also stipulates it to take comprehensive corrective actions to enhance the execution, risk management and supervision of the company’s loss mitigation program.
Noting that Wells Fargo’s inability to meet OCC’s 2108 consent requirements is “unacceptable”, Acting Comptroller of the Currency, Michael J. Hsu remarked, “The OCC will continue to use all the tools at our disposal, including business restrictions, to ensure that national banks address problems in a timely manner, treat customers fairly, and operate in a safe and sound manner.”
Accepting the long-standing deficiencies, Wells Fargo’s CEO Charlie Scharf said, “our work to build the right foundation for a company of our size and complexity will not follow a straight line. We are managing multiple issues concurrently, and progress will come alongside setbacks. That said, we believe we’re making significant progress, the work required is clear, and I remain confident in our ability to complete it.”
The company also announced that a separate 2016 consent order, which was issued by the Consumer Financial Protection Bureau (CFPB) in relation to the bank’s retail sales practices, ended. The satisfaction of the consent order, one of the original orders that set the legal-hassle ball rolling for Wells Fargo, indicates its progress. However, it continues to operate under the $1.95-trillion asset cap imposed by the Federal Reserve in the fallout of the violations.
Management said, “we have done substantial work designed to ensure that the conduct at the core of the consent order – which was reprehensible and wholly inconsistent with the values on which this company was built – will not recur.”
The company has been shifting its focus to rebuilt capabilities by investing in businesses core to its consumers and the corporate client base, while monetizing stake in less attractive ones. The efforts have started to bear fruits by boosting efficiency, strengthening the balance sheet and leading to significant cost savings.
In late August, in its efforts to consolidate and tweak operations, Wells Fargo announced the combination of its Treasury Management and Global Payment Solutions businesses under the Global Treasury Management umbrella. The company believes that this will facilitate clients to efficiently manage their funds and process payments worldwide.
Shares of the company have jumped 82.2% over the past year compared with 57.1% growth recorded by the industry.
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Wells Fargo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Several other banks continue to encounter legal hassles and are charged with huge sums of money for business malpractices. Recently, Credit Acceptance Corporation CACC announced the settlement of the lawsuit with the Massachusetts Attorney General and agreed to pay $27.2 million. In August 2020, AG Maura Healey filed a lawsuit in Suffolk County Superior Court, claiming that Credit Acceptance violated state consumer protection, and debt collection laws and regulations.
In order to address and settle previously-slapped allegations of lending discrimination by redlining the Black and Hispanic neighborhoods in Houston, TX, Cadence Bancorporation CADE entered separate arrangements with the U.S. Department of Justice (DOJ) and the OCC to pay more than $8.5 million.
DOJ stated in May that State Street Corporation STT entered a deferred prosecution agreement and agreed to pay a criminal fine of $115 million to settle charges of deceiving its clients by secretly overcharging them for back-office expenses.
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