The Consumer Financial Protection Bureau is seeking to fine Wells Fargo up to $1 billion for alleged abuses related to auto insurance and mortgage lending, Reuters reported Monday.
According to the Reuters report, which cited unnamed sources, acting CFPB Director Mick Mulvaney is pursuing a settlement with Wells in the coming days over claims the bank wrongly placed customers into force- or lender-placed auto insurance, and charged improper fees for modifying home loans of consumers in bankruptcy.
The news of more potential enforcement problems for Wells could keep the pressure on the bank’s management amid persistent governance issues. Speculation about the CFPB penalty also comes just days before Mulvaney starts two rounds of congressional hearings — his first devoted to his role as the bureau’s acting chief. (Mulvaney also serves as director of the Office of Management and Budget.)
“We don’t believe this will be the final policy risk for Wells Fargo from its consumer banking troubles as both the far left and far right are pushing the issue,” said Jaret Seiberg, a policy analyst at Cowen Washington Research Group.”We believe more management changes could occur. We also note banks typically will not take these disputes to court.”
Seiberg said the bank may have to take more drastic measures for its regulatory troubles to go away.
“Our view remains that this issue is unlikely to disappear until Wells Fargo replaces all of the executives who were in management positions when the controversies occurred,” he wrote. “This would include Tim Sloan, the current CEO even though he was not in charge when the fake account controversy occurred.”
Both Wells Fargo and the CFPB declined to comment.
Wells is still trying to recover from the significant hit to its reputation after it agreed to pay $190 million in September 2016 to settle charges that thousands of employees opened millions of bank and credit card accounts in order to collect bonuses and keep their jobs. Wells fired 3,500 rank-and-file employees and former CEO John Stumpf resigned in 2016 because of the phony-accounts scandal.
Despite the CFPB’s pulling back on enforcement efforts under Mulvaney, such a massive penalty against Wells may be in line with the Trump administration’s policy objectives.
In December, President Trump vowed in a tweet to pursue strong penalties against Wells. At the time, Trump tweeted, “Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased.”
Mulvaney is set to testify on Wednesday and Thursday before the House Financial Services and Senate Banking committees, respectively.