Wells Fargo has agreed to pay $575 million to resolve claims with 50 states and the District of Columbia related to opening millions of fake accounts as well as other activities.
The settlement, announced Friday by Iowa Attorney General Tom Miller, is among the largest settlements between a national bank and state AGs and is separate from actions previously taken by federal regulators on related issues against the $1.9 trillion-asset Wells.
Some of the settlement related to Wells’ phony-accounts scandal. It has already identified as many as 3.5 million accounts in which it opened accounts without a consumer’s consent as a result of aggressive sales practices. The states also alleged Wells Fargo “improperly charged” costs for force-placed insurance on more than 2 million auto-related accounts and fees on mortgage borrowers for extending a rate lock.
“This agreement is unique and one of the largest multistate settlements with a bank since the National Mortgage Settlement in 2012,” Miller said in a press release. “This significant dollar amount, on top of actions by federal regulators, holds Wells Fargo accountable for its practices.”
In a statement issued Friday, Wells Fargo said the settlement with the AGs resolves many of the issues that have been identified in recent years since federal regulators cracked down on the bank’s sales practices in late 2016. Earlier this year, the Federal Reserve placed a cap on Wells’ growth as a result of ongoing issues at the bank. That cap has not been lifted.
“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 CEO and president, said in a press release.
The bank said it had accrued $400 million of the settlement amount by the end of the third quarter and expects to accrue the remaining $175 million in the fourth quarter of this year.
As part of the settlement with the AGs, Wells Fargo agreed to pay more than $385 million to roughly 850,000 auto finance customers who were charged premiums, interest and fees for force-placed collateral protection insurance despite already having regular auto insurance policies in place.
Wells Fargo will also refund $37 million to certain auto finance customers related to Guaranteed Asset/Auto Protection, or GAP, products that were not properly paid out. And the bank will finish paying out $100 million to mortgage borrowers in which it previously found were wrongfully charged fees for extending an interest rate lock.
Wells Fargo had previously agreed to pay a separate $1 billion fine with federal regulators including the Comptroller of the Currency and the Consumer Financial Protection Bureau beginning in 2016 when the agencies began cracking down. The bank said it has replaced the sales practices programs that were a major crux to opening fake accounts and improperly charging customers.
Wells Fargo’s “sales goals and the incentive compensation program created an impetus for employees to engage in improper sales practices to satisfy such sales goals and earn financial rewards,” the AGs said Friday. “Those sales goals became increasingly harder to achieve over time, the states alleged, and employees who failed to meet them faced potential termination and career-hindering criticism from their supervisors.”
As part of the settlement with the AGs, Wells Fargo will implement a program within 60 days for consumers to seek remediation with the bank who might have fallen outside of previous restitution programs.
“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 ongoing restitution efforts,” the AGs said.