US financial services watchdog has ordered Wells Fargo to pay a penalty of $3.7bn for violations across multiple product lines in the consumer banking unit.
The Consumer Financial Protection Bureau (CFPB) has ordered the bank to pay a $1.7bn civil penalty and $2bn to redress more than 16 million customers affected by the violations.
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Wells Fargo illegally assessed fees and interest charges on car and mortgage loans, had customers’ cars wrongfully repossessed and misapplied payments to auto and mortgage loans, the regulator said.
The lender also charged unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts, the CFPB added.
Specifically, the systematic failures in auto loan servicing led to a loss of $1.3bn across 11 million accounts.
The bank also wrongly rejected hundreds of requests for home loan modifications for at least seven years and froze more than one million accounts due to a flawed automated filter.
CFPB director Rohit Chopra said: “Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families. 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 bank has also been mandated to stop imposing surprise overdraft fees and to make sure that auto loan borrowers are reimbursed for some add-on costs.
Responding to the development, Wells Fargo CEO Charlie Scharf said: “As we have said before, we and our regulators have identified a series of unacceptable practices that we have been working systematically 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.”
