Wells Fargo to Pay $575M in Deal With States

DES MOINES, Iowa (CN) – Attorneys general of all 50 states and the District of Columbia said Friday that Wells Fargo will pay $575 million to settle claims of state consumer protection violations stemming from its phony accounts scandal.

In this May 17, 2018 file photo, the logo for Wells Fargo appears above a trading post on the floor of the New York Stock Exchange. Wells Fargo is paying $575 million as part of deal to resolve investigations by every state into its banking practices, which have included creating phony accounts and using manipulative sales practices. (AP Photo/Richard Drew, File)

The settlement with the states comes in the wake of revelations that Wells Fargo’s employees, under pressure from cross-selling incentives, created new checking, credit card and other accounts for existing customers who did not want nor ask for them.

Investigations have found that more than 3.5 million Wells Fargo customers’ accounts were affected.

The San Francisco-based banking and mortgage giant has previously acknowledged the creation of unauthorized accounts, and it has paid more than $600 million in restitution to customers through settlements with the Comptroller of the Currency, Consumer Finance Protection Bureau and a class-action lawsuit. The company also has paid more than $1 billion in civil penalties to the federal government.

Iowa Attorney General Tom Miller, one of four state attorneys general who led the investigation leading to Friday’s agreement, called it a “major settlement” for the states because it underscores the authority of attorneys general to enforce state consumer protection laws against national banks.

“This is an important precedent,” Miller said in a news conference in Des Moines Friday.

“This agreement is unique and one of the largest multistate settlements with a bank since the national mortgage settlement in 2012,” he said in a separate statement. “This significant dollar amount, on top of actions by federal regulators, holds Wells Fargo accountable for its practices.”

Wells Fargo simultaneously announced the settlement Friday, stressing that the issues covered by its deal with the states had been previously disclosed and no new issues were identified in the agreement. The settlement also includes a stipulation that the company does not admit or deny the allegations against it.

“This agreement underscores our serious commitment to making things right in regard to past issues as we work to build a better bank,” Tim Sloan, Wells Fargo’s chief executive officer and president, said in a statement Friday.

The settlement payment will be parceled out among the states, ranging from $1.1 million for the District of Columbia to $148.7 million to California, with many states intending to direct the money into consumer protection efforts.

In addition to the financial payments to resolve potential legal claims the states might have brought against Wells Fargo, the company agreed to continue its review of customers’ accounts and respond to their inquiries, and create and maintain a website dedicated to the unauthorized account issues and its remediation efforts.

Aside from the creation of unauthorized accounts, the settlement also covers other alleged practices by Wells Fargo such as referring customers for third-party renters and life-insurance policies; charging customers for auto-loan protection insurance; failing to refund premiums on gap insurance; and incorrectly charging fees for locking in mortgage rates.

The most significant, Miller said, are the unauthorized accounts.

“Wells Fargo incentivized and pushed employees to open new accounts,” he said, which affected the employees’ bonuses and their jobs.

“The inevitable happened,” Miller said. “They made up new accounts.”

%d bloggers like this: