Wells Fargo seems to be back in federal regulators’ crosshairs. Bloomberg reports this month that the Consumer Financial Protection Bureau is expecting to fine the bank more than $1B to settle investigations into the bank’s business practices.

The CFPB and Wells Fargo did not provide details about these inquiries. NerdWallet was also denied comment by the CFPB or Wells Fargo. In a late October filing to the Securities and Exchange Commission, Wells Fargo stated that it is in “resolution talks” with the CFPB regarding investigations into automobile lending, consumer deposits, and mortgage lending.

Wells Fargo, CFPB

This is not the end of Wells Fargo’s troubles with the CFPB or other federal regulators. Following the bank’s fake account scandal, in which Wells Fargo admitted that it had created millions of fraudulent accounts without customers’ consent in 2016, a series of CFPB reprimands was issued and additional federal actions were taken.

According the most recent Bloomberg account the CFPB is pressing Wells Fargo for more than $1B to settle multiple investigations into Wells Fargo’s “mistreatments of customers.”

Wells Fargo is located in San Francisco and is the third-largest national bank according to domestic assets of $1.69 trillion, September 2022. According to the Federal Reserve

The bank reported $2 billion in operating loss in its third quarter. This was according to Wells Fargo CEO Charles Scharf. These losses were due to customer remediation and litigation, as well as regulatory matters that are primarily related to historical matters.

All banks watch to see what happens when the CFPB takes action against a bank.

Expert on the Ground

professor of law, University of Houston Law Center

These losses resulted in a 31% drop in quarterly net income over the previous year. According to the SEC filing, Wells Fargo earned $3.5 billion in net income for the third quarter. According to public filings, this is a decrease from the net income of $5.1 trillion in the third quarter 2021.

Scharf, who was appointed CEO in 2019, has worked to end the bank’s regulatory problems. During the April 2022 earnings call, Scharf stated that “we have much more work ahead of us to meet our regulatory requirements.” He also said that there would be setbacks but that he was confident in our ability and capability to keep the gaps closed over the next few years.

Observers warn that the current actions could have an impact on those who do not bank with Wells Fargo. Jim Hawkins, a professor of law at University of Houston Law Center, said that when a bank of this size is targeted, it can have ripple effects on the entire consumer finance industry.

Hawkins states that “Every time the CFPB takes action against a bank, all other banks are watching to determine what happens.” These banks always do a cost-benefit analysis, right? They want to know how likely they are to be penalized and what the penalty will be. They see a billion-dollar penalty and think or their lawyers think: “Hey, we better keep track so we don’t get that kind of fine span>

What’s the CFPB?

In 2011, the Consumer Financial Protection Bureau was established as an independent agency of the Federal Reserve. Its mission is to oversee consumer financial institutions and enforce regulations. The CFPB was created by the Obama administration to address the unregulated mortgage industry that caused the Great Recession of 2007 and 2008.

In the past, many agencies had been assigned to monitor and enforce laws in the financial market. Those efforts were centralized when the CFPB was created. Hawkins explains that the CFPB was established to ensure banks and financial institutions had a dedicated watchdog who kept an eye on them.

“Before CFPB, all federal regulators were focused only on the safety and soundness bank. Their primary task was not consumer protection. Hawkins states that the CFPB is unique in its sole focus on protecting consumers. The FDIC [Federal Deposit Insurance Corp.] as well as the Federal Reserve all try to ensure that banks don’t go bankrupt.

Recent history of Wells Fargo’s

Wells Fargo’s ties with the CFPB began September 2016. The bank admitted that its employees created fake accounts for customers between 2011 and 2015. This was to help them meet their high sales goals. In 2016, Wells Fargo was fined $185 million and subject to penalties.

The bank has since admitted or been caught engaging more in fraudulent or unethical activities.

  • March 2017 To compensate customers who were affected by the bank’s fake accounts scandal, the bank has reached a $110,000,000 settlement.

  • August 2017, Wells Fargo explains that it opened as many as 3.5million fraudulent bank accounts between 2009-2016.

  • February 2018, Wells Fargo: The Federal Reserve took unprecedented action by setting an asset limit for the institution at $1.95 Trillion in assets, until it “sufficiently improves” its governance and controls. This was the first time that the Fed had imposed a cap of $1.95 trillion in assets on a financial institution. The Fed also required the bank to appoint three members of its board. The bank’s asset limit was still in place as of November 16, 2022.

  • April 2018: Wells Fargo has been fined over $1 billion for its unethical conduct with auto loans and mortgage businesses. The CFPB discovered that Wells Fargo overcharged customers on mortgage interest rates, unfairly added insurance policies and added additional costs to auto loans borrowers.

  • August 2018: Wells Fargo is penalized $2.1 billion for its involvement in the 2008 housing crisis. The Justice Department discovered that Wells Fargo lied to investors about its creditworthiness for the mortgage loans it sold.

  • February 2020 Wells Fargo was fined $3 billion by the Justice Department and SEC for its fake accounts scandal.

  • September 2021: Wells Fargo to pay $72.6 million to settle Justice Department lawsuits. The bank was accused of overcharging hundreds of customers for currency exchange. Customers would be given “false explanations” by the bank about the fees it charged for swapping currencies.

A Bloomberg report from March 2022 also found that Wells Fargo rejected more Black mortgage refinance applications than it approved during the 2020 mortgage refinance boom.