Thursday 22 December 2022

Bank Will Fork Over $3.7 Billion After ‘Thousands’ Wrongly Lose Homes And Vehicles

 Wells Fargo will pay $1.7 billion in civil penalties and $2 billion in redress after the bank carried out a number of abuses concerning mortgages and consumer accounts.

According to a press release from the Consumer Financial Protection Bureau, the company illegally assessed fees and interest charges on various loans, wrongly repossessed cars, and misapplied mortgage payments, leading “thousands of customers” to lose their vehicles and homes. The bank also “charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts” in actions that affected 16 million users.

“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” Consumer Financial Protection Bureau Director Rohit Chopra remarked, adding that his agency is “ordering Wells Fargo to refund billions of dollars to consumers across the country.”

The $3.7 billion fine marks the largest in agency history.

Wells Fargo improperly denied thousands of mortgage loan modifications over seven years, leading some customers to lose their homes even as the bank was aware of the problem. The bank also charged surprise overdraft fees when account holders had enough deposits to cover the transactions.

Of the $2 billion in redress, $1.3 billion will be used for affected vehicle loans, $500 million for affected deposit accounts, and $200 million for affected mortgage accounts. The $1.7 billion penalty will be used for a victims’ relief fund managed by the Consumer Financial Protection Bureau. Wells Fargo was also ordered to stop charging surprise fees and address oversights with respect to vehicle loans.

The news comes as inflationary pressures and rising interest rates increase the number of defaults on various types of consumer debt. The number of people behind on their car payments has approached pre-recession levels, while defaults have soared past levels seen in 2019 for low-income consumers, according to data from Fitch Ratings obtained by NBC News.

Higher mortgage rates have contributed to plummeting demand in the housing market, even as fewer families can afford a home. Only 42% of American families earning $90,000 per year were able to afford new and existing properties sold between the beginning of July and the end of September, according to data from the National Association of Home Builders, corresponding to aggressive rate hike decisions from the Federal Reserve meant to cut inflation.

Chopra characterized Wells Fargo as a “repeat offender.” Indeed, the bank agreed to pay $3 billion in February 2020 after employees were pressured to “meet unrealistic sales goals that led thousands of employees to provide millions of accounts or products to customers under false pretenses or without consent, often by creating false records or misusing customers’ identities,” according to a statement from the Justice Department.

Wells Fargo faced criticism earlier this year after a report from the New York Times found executives had conducted fake interviews with female and minority applicants to meet diversity, equity, and inclusion thresholds. The company had paid $7.8 million in August 2020 to settle a claim from the Department of Labor asserting that the bank discriminated against more than 34,000 African-American applicants for banking, customer sales, and administrative support positions, as well as over 300 female applicants for administrative support positions.

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