The Wells Fargo Scandal is a most talked about controversy in which millions of fraudulent savings and checking accounts were created on behalf of the Wells Fargo clients without their knowledge.
In the Tuesday hearing, Wells Fargo was ordered to pay a sum of 3.7 billion U.S. Dollars for the scandal that included widespread mismanagement of auto Loans, mortgages, and deposit accounts.
The order was issued by the Consumer Financial Protection Bureau (CFPB). The Bureau has also made a decision to fine the company of above 2 billion USD as compensation to the clients and 1.7 billion USD as a penalty for the legal violations over many of its wide product lines.
The CFPB reported that the company has misapplied loan payments multiple times, wrongfully foreclosed on homes and conducted illegal repossession of vehicles, made incorrect fees and interest assessments, and charged surprise overdraft fees, all this in addition to the misuse of more than 16 billion consumer accounts.
Tim Sloan, the CEO of Wells Fargo was assigned to testify on Tuesday before the House Financial Services Committee. The Tuesday hearing is titled as Holding Megabanks Accountable: An Examination of Wells Fargo’s Pattern of Consumer Abuses.
Wells Fargo & Company is a U.S. company offering multinational financial services. It operates globally with corporate headquarters situated in San Francisco, California, and operational headquarters in Manhattan. The company’s name has topped the headlines for a variety of embezzlements and financial scandals.
Read further to know about the scandals in detail:
The Timeline Of Wells Fargo Scandal Events
Wells Fargo Fake Accounts Scandal
Wells Fargo was issued with a combined fine of 185 million USD from the CFPB, the Office of the Comptroller of the Currency, and the City and County of Los Angeles.
It was for the illegal opening of more than 1.5 million savings and checking accounts on behalf of their clients; the clients were totally unaware of the matter. The company has also issued about 500,000 credit cards without the consent of the clients.
Out of the 185 million USD, 100 million USD was by the Consumer Financial Protection Bureau (CFPB), 35 million USD by the Office of the Comptroller of the Currency, and 35 million USD by the City and County of Los Angeles.
The company had initially initiated a program to create accounts for the clients in an incentive compensation program. Illegal savings and checking accounts have been created to cover this.
As a result, 5,300 employees got fired from the company. An order to keep aside a sum of 5 million USD as the compensation fund was issued.
Illegal Repossession Of Vehicles
Wells Fargo illegally repossessed the cars of military members.
The bank let the interest rates go above the lawful 6% and did not disclose before the court that the borrowers were on duty when it asked for evictions, and also did not obtain court papers prior to the car repossession.
This resulted in the payment of a 20 million USD fine to the OCC and restitution of 10 million USD to the affected military members.
In October 2016, the then-CEO and Chairman of the company, John Stumpf announced his retirement. The announcement which came in the middle of the scandals caused widespread criticism. Timothy J. Sloan the then Chief Operating Officer and President of the company became the next CEO.
Failure In The Living Will Test
The Living Will Test is a requirement that is mandatory for big financial firms that would show how they would unwind in the declaration of bankruptcy. Due to the failure of the test the functionary size of the bank was restricted by the authorities.
Later in 2016, the accreditation of the company was removed by the Better Business Bureau.
Fraud Accounts Again
As per the then latest data, the presence of about 3.5 million more fraud accounts was detected. The company initially turned down the report stating it as unverified but later said that could be possible.
Failure In The Community Lending Test
In an OCC Community Lending Test, Wells Fargo received a status of needs to improve. The company listed in a citation that identified it with the presence of violations across multiple lines of business within the bank and as significant harm to customers.
A former employee who had a manager position and was fired in 2010 won the case against the company. The company had to pay 5.4 million USD as compensation.
Small Business Retailer Lawsuit
Wells Fargo got sued in a lawsuit for overcharging small business retailers for credit card-related services. The company had sent a pseudo fine print of 63 pages to the retailers and also made them pay a huge amount of money as early termination fees.
In 2017 an investigation report was released which identified John Stumpf as responsible for the succeeding of the scandals. The reports stated that Stumpf was aware of the mishappenings but he did not initiate any action to stop it from taking place or reporting it.
Growth Restricted By Federal Reserve
The Federal Reserve restricted the bank’s growth identifying it with consumer abuses and compliance breakdowns.
Further, the bank was sued by Sacramento for the practice of illegal activities that subdued the property values of the minority and low-income communities.
Investigation On Wealth Management
The Department of Justice was pressing the bank for an investigation into the Wealth and Investment Management Business. There was a concern about the happening of inappropriate referrals or recommendations.
Billion Dollar Settlement
The bank decided on a 1 billion dollar settlement with the CFPB and the OCC. It was for the charges of mortgage locks and auto loan issues.
The mortgage rate locks were extended because of the mistakes of the bank, but the clients were charged for it.
Alteration Of Business Data
The wholesale banking division of the bank altered data related to the Social Security numbers and DoB without letting the customers know about it. Bank later said that it was committed in an attempt to meet the anti-money laundering control deadline.
480 Million Dollar Settlement
Wells Fargo made a settlement of 480 Million Dollars in the charges filed by the investors. The bank was charged with security fraud allegations.
Clawed By SEC
SEC made Wells Fargo pay 4 million USD in the business of the active trade of high-fee debt products. The bank was also made to repay more than 1 million USD to the investors.
Refunds On Add-Ons
The bank had added add-on services to the customers’ accounts without their complete understanding. Services like insurance for pets and linking accounts with legal services were employed by the bank.
Issues In Private Bank Part
The Wealth Management Business of Wells Fargo had a Private Bank part as well and issues were identified in that. The private party was charged with allegations of working heavy sales culture and not benefitting the clients.
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2.1 Billion Payment For Housing Bubble
The company was charged with cases of not proper representation of mortgages that were sold over to the investors as part of the housing bubble.
Confiscation Of Houses
The houses of around 400 loaners were confiscated by the bank. The bank was made to keep aside a sum of 8 million USD as a step to undo the wrongings that had happened to the 625 loaners who were falsely denied loan modifications.
Fee Disclosure Practices
In 2019, the SEC provided sanctions for 79 firms because they had advisors choose more expensive mutual funds for their clients. This way more fees were paid to such advisors and Wells Fargo was one among these firms.
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