Wells Fargo Agrees To Pay Record $1BN Fine In Settlement With Mulvaney's CFPB

As was widely expected, Wells Fargo announced today that it has agreed to pay a $1 billion fine to the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau in what is the largest fine ever levied by the CFPB in its six-year existence.

The fine was levied over Wells' shady sales practices, including the opening of millions of fraudulent accounts in its retail bank, and abuses in its auto-lending and mortgage lending divisions.

Wells

As a result, the company will need to adjust its already unremarkable first quarter results to factor in an additional non-tax-deductible accrual of $800 million, which shaves 16 cents off its EPS to 96 cents.

Wells Fargo & Company (WFC) announced today it has entered into consent orders with the Office of the Comptroller of the Currency (OCC) and Consumer Financial Protection Bureau (CFPB) that address matters pertaining to the company’s compliance risk management program and issues regarding certain interest rate-lock extensions on home mortgages and collateral protection insurance (CPI) placed on certain auto loans. The company has previously disclosed publicly the issues regarding interest rate-lock extensions and CPI.

"For more than a year and a half, we have made progress on strengthening operational processes, internal controls, compliance and oversight, and delivering on our promise to review all of our practices and make things right for our customers," said Timothy J. Sloan, president and chief executive officer of Wells Fargo. "While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency. Our customers deserve only the best from Wells Fargo, and we are committed to delivering that."

The orders, which are available in their entirety at the respective web sites for the OCC and CFPB, require the company to pay $1 billion in total civil money penalties. As a result, the company will adjust its first quarter 2018 preliminary financial results by an additional accrual of $800 million, which is not tax deductible. The accrual reduces reported first quarter 2018 net income by $800 million, or $0.16 cents per diluted common share, to $4.7 billion, or 96 cents per diluted common share.

Under the consent orders, Wells Fargo will also be required to submit, for review by its board, plans detailing its ongoing efforts to strengthen its compliance and risk management, and its approach to customer remediation efforts.

Like we said yesterday, while the fine is technically the "largest fine ever" levied by the CFPB, it's essentially a slap on the wrist that pales in comparison to a recent DOJ fine of $14 billion levied against Deutsche Bank.

Wells Fargo shares are up 1.4% since the open, showing no discernible reaction to the news. Mick Mulvaney was appointed to lead the CFPB late last year after its previous director, Richard Cordray, stepped down. Initially, media organizations reported that Mulvaney was going to abandon the probe into Wells Fargo, a claim he denied, and has now definitively proven false.

Comments

NoDebt toady Fri, 04/20/2018 - 10:47 Permalink

I have a question:  Does anybody here feel "protected" by the Consumer Financial Protection Bureau?  Could anybody cite me an example of something they've done that has made your financial life better or safer?

 

In reply to by toady

Disgruntled Goat DSCH Fri, 04/20/2018 - 10:53 Permalink

Hey, they can just create another off-balance sheet SPV to hold this liability  and add it to the other $2T worth of these entities which they have already created and are still holding ... but theyre NOT insolvent right? No way no how .... because it would be illegal for an insolvent institution to pay dividends ..... or something ....

In reply to by DSCH

numapepi DSCH Fri, 04/20/2018 - 11:45 Permalink

The "cost of doing business," is to those who did nothing wrong, while those who did will get huge bonuses. That should stop the criminal behavior...

 

"While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them..." 

 

Executives at Wells Fargo and the government do have the same agenda... screw the shareholders, customers and public to enrich themselves.

 

How progressive!

In reply to by DSCH

FireBrander Nuclear Winter Fri, 04/20/2018 - 10:12 Permalink

Drive by any local Wells Branch and there are customers all day long...lunch hour and Saturdays, the parking lot is full. I don't understand it..even if a person is clueless about the criminality of the bank, every "service" they offer is cheaper elsewhere...and their mortgage rates are ALWAYS .25% higher than everyone else and their closing costs are a rip-off too...how they have a single customer is just mind blowing.

In reply to by Nuclear Winter

wwwww Fri, 04/20/2018 - 10:08 Permalink

Shareholders pay the fine. Wells has years to pay it. They will announce a reduction on a Friday in August.

And nobody goes to jail!

A person doing anything near what they did would face criminal prosecution. Corporate "person"? No.

Sonny Brakes Fri, 04/20/2018 - 10:11 Permalink

A fine, which will be paid for using higher customer service charges (thus, giving all the other banks a reason to raise their fees); loan application fees (they have most of their customers over a barrel); and share dividends that could have been returned to shareholder, but if those shareholders are also Warren Buffett or any other of the protected class, then that fine will also be put on the backs of the employees who still work there after a round of layoffs.

Endgame Napoleon Cautiously Pes… Fri, 04/20/2018 - 10:37 Permalink

This will trend high with the socialist youngins,’ speaking of which they get in trouble when they mess with banks.

In my shop, a young girl, barely out of high school, wrote us a not-so-backed-up check for the ugliest selection of merchandise in our store. 

When we found out what she did, I did not want to do anything about it because 1) she was a baby, and 2) I was glad to see the ugly merchandise gone for fear a real customer would buy it, forcing me to turn out an equally ugly design.

There was no visual redemption for this merchandise. It came with the shop. Why this young person wanted it, who knows? 

We found out that she had done it in several places, and despite the fact that she was just a kid, she got in big trouble from other merchants. We let it go.

In reply to by Cautiously Pes…

Umh Fri, 04/20/2018 - 10:33 Permalink

I think Wells Fargo would be a good test case for how to split up a to big to fail company. If it doesn't work out perfectly I'm okay with that.

JoeTurner Fri, 04/20/2018 - 10:51 Permalink

So does this mean that all $1B will now be funneled to #BlackLivesMatter and other assorted radical leftist nonsense ? After all the CFPB was created to be an unaccountable slush fund for Democrap extortion and money laundering funded by the FED.

MrBoompi Fri, 04/20/2018 - 11:14 Permalink

Despite all the crap about share prices and EPS, nowhere is it mentioned how much Wells Fargo profited from the abusive practices.  There is no way to tell if this $1 billion fine is simply a speeding ticket like the rest of the Wall St "penalties".  

Kickaha Fri, 04/20/2018 - 11:30 Permalink

Identity theft, and the actual thefts of money that motivate people to steal other people's identities, is the plague of the 21st Century and may serve as the downfall for all internet commerce.

The "sales strategy" of stealing customers' identities and then using them to open up new accounts without their knowledge in order to meet sales quotas was so widespread throughout Wells Fargo branches nationwide that it would seem impossible for it not to have been a conspiracy directly involving a phalanx of low-level corporate executives, area managers, district managers, branch managers, assistant branch managers, and tellers.  And the top-level executives must have known about it and tacitly approved of it.  Most Boards of Directors are pretty much clueless about anything, getting their information from the crooked CEO's office, so I won't paint them with the same brush.

But as to everybody else mentioned above, each and every one of them should be indicted, prosecuted, convicted, and given jail time when sentenced.  They will all most certainly present the "good Nazi" defense.  Fuck that, before every corporate employee becomes a good Nazi with no moral compass.

As for the company, revoke its national banking license.  No need to break it up.  The bankruptcy court can auction off its assets in orderly fashion.

As for the shareholders, fuck them, too.  In the final analysis of this overall situation, there was a total lack of shareholder oversight. The idea of shareholder democracy is a farce as things stand right now.  Having a major bank go tits up due to shareholders having installed a bunch of degenerate felons to run their corporation, and then annually paying them obscene amounts of money to do so with no regards for the law, because following the law hurts profits, would be the very best thing that ever happened in America throughout  the entire history of the nation.

Prosecuting all the good Nazi employees would be the second best thing, as it would maybe give all of the other corporate types the fear of the same thing happening to them when they choose to blithely participate in the next fraud rather than "risk losing my job and my pension".  Better to quit than to lose everything while cooling your heels in a slam-them-in-the-ass prison.

Spectre Fri, 04/20/2018 - 11:52 Permalink

I'd sure like to see the internal breakdown of who gets what out of the $1B proceeds.  The Gov't should get ZERO and any of the Wells customers who were financially damaged should split up the cash.  The CFPB has a budget to do their job already.

Peter41 Fri, 04/20/2018 - 12:30 Permalink

That shady operator, Warren "Daddy Warbucks" Buffett loved this bank when it was disgorging ill gotten gains to him. Now, not so much.