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Home Business Money and Finance

Wells Fargo: A History Of Scandals!

William R Simmons by William R Simmons
27 December 2022
in Money and Finance
Wells Fargo A History Of Scandals

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. 

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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.

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Wells Fargo To Repay $2B To Customers As Part Of A $3.7b Settlement

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

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:

Table of Contents

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  • The Timeline Of Wells Fargo Scandal Events
    • 2016 September 
      • Wells Fargo Fake Accounts Scandal
    • 2016 October
      • Illegal Repossession Of Vehicles
    • 2016 December 
      • Failure In The Living Will Test
    • 2017 March
      • Fraud Accounts Again
      • Failure In The Community Lending Test
    • 2017 April
    • 2017 August
      • Small Business Retailer Lawsuit
    • 2018 February
      • Growth Restricted By Federal Reserve
    • 2018 March
      • Investigation On Wealth Management
    • 2018 April
      • Billion Dollar Settlement 
    • 2018 May
      • Alteration Of Business Data
      • 480 Million Dollar Settlement
    • 2018 June
      • Clawed By SEC
    • 2018 July
      • Refunds On Add-Ons
      • Issues In Private Bank Part
    • 2018 August
      • 2.1 Billion Payment For Housing Bubble
      • Confiscation Of Houses
    • 2019 March
      • Fee Disclosure Practices

The Timeline Of Wells Fargo Scandal Events

2016 September 

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. 

2016 October

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. 

2016 December 

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. 

2017 March

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. 

2017 April

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.

2017 August

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.

2018 February

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. 

2018 March

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. 

https://twitter.com/WellsFargo/status/1603752558295662593

2018 April

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. 

2018 May

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.

2018 June

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.

2018 July

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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2018 August

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.

2019 March

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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