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The bank also has agreed to pay more than $385 million to 850,000 auto finance customers who were wrongly charged premiums, interest, and fees for forced-place collateral protection insurance, even though they already had the coverage.
That includes payments to more than 51,000 customers whose cars were repossessed, according to the multi-state settlement.
It comes on top of more than $1 billion in civil penalties that the bank must pay the federal government to settle charges over mortgage and auto loans, as well as a separate $65 million settlement with the state of New York.
Wells Fargo identified more than 3.5 million accounts that either were opened, had funds transferred or debit or credit card applications filed without the customers’ knowledge or consent, the government said.
The bank has also identified 528,000 online bill pay enrollments nationwide that may have resulted from improper sales practices.
Wells Fargo also improperly submitted more than 6,500 renters insurance and/or simplified-term life insurance policy applications and payments from customer accounts without the customers’ knowledge or consent.
“Wells Fargo’s corporate culture led to repeated breaches of its customers’ trust,” New Jersey Attorney General Gurbir S. Grewal said. “This settlement should send a message to all financial institutions that they need to take steps to avoid similar consumer protection violations.”
The states accused Wells Fargo’s senior management in court papers of exerting “significant pressure” on middle management and line employees to generate sales by setting “unrealistic sales goals and an incentive compensation program.”
“These sales goals became increasingly hard to achieve over time, the states allege, and employees who failed to meet them faced potential termination and unfavorable reviews,” Grewal said. “As a result, employees routinely enrolled customers in checking and savings accounts, credit cards, debit cards, unsecured lines of credit and online bill pay services without their knowledge or consent.”
It didn’t stop there, the states said.
Wells Fargo also failed to provide proper refunds to auto finance customers who bought Guaranteed Asset Protection insurance policies, designed to address situations in which a car buyer/borrower ends up owing more than a vehicle’s value, they alleged.
As a result, Wells Fargo has agreed to provide refunds totaling more than $37 million to certain auto finance customers.
Wells Fargo also improperly charged residential mortgage consumers for rate lock extension fees, the states charged.
With rate lock extension, borrowers could “lock in” an ostensibly favorable interest rate, for a fee, even if their loans didn’t close within the defined period.
Some branches “were charging rate lock extension fees even when the delay was caused by Wells Fargo,” Grewal said.
The bank has identified and contacted affected consumers and has refunded or agreed to refund more than $100 million of the fees, he said.
Wells Fargo has committed to or already provided restitution to consumers in excess of $600 million through agreements with the government, as well as the settlement of a related consumer class-action lawsuit.
Of the total in the multi-state agreement:
- New Jersey gets $16,989,709.60 – the sixth-highest amount of the 50 states and District of Columbia;
- New York gets $11,854,349.87.
- Connecticut gets $5,242,279.59.
California receives the most: $148,733,525.16.
California’s total was over $100 million more than Texas, which was second with $47,378,217.69, followed by Arizona at $37,136,571.08.
As part of its settlement with the states, Wells Fargo has agreed to implement a program through which consumers who believe they were affected by the bank's conduct but fell outside the prior restitution programs can contact the bank to be reviewed for potential redress.
Wells Fargo will create and maintain a website for consumers to use to access the program and will provide periodic reports to the states about the program’s progress, under the agreement.
Additionally, the bank is required under an order from the Federal Reserve to strengthen its corporate governance and controls, and is currently restricted from exceeding its total asset size.
More information on the redress review program, including Wells Fargo phone numbers and the website address, will be available on or before February 26, 2019, the government said.
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