Wells Fargo Agrees to Pay $3 Billion to Settle U.S. Case Over Fraudulent Customer Accounts
Wells Fargo has agreed to pay $3 billion to resolve its potential criminal and civil liability stemming from charges that the bank engaged in fraudulent sales practices for more than a decade.
The company acknowledged collecting millions of dollars in fees for bank accounts, debit cards, and other products that customers did not request or need. These practices were carried out by thousands of Wells Fargo employees in order to meet unrealistic sales targets, and involved employees providing millions of accounts or products to customers under false pretenses or without consent, often by creating false records or misusing customers’ identities.
Authorities have commented that bank managers were aware of the illegal conduct as early as 2002 but allowed it to continue until 2016.
CEO Charlie Scharf said in a statement, “The conduct at the core of today’s settlements—and the past culture that gave rise to it—are reprehensible and wholly inconsistent with the values on which Wells Fargo was built . . . we are committing all necessary resources to ensure that nothing like this happens again.”
Wells Fargo reported net income of $2.9 billion in its most recent quarter.
None of the $3 billion penalty will go to Wells Fargo customers. The bulk of the fine will go to the U.S. Treasury and $500 million will go to the Securities and Exchange Commission to be distributed to investors. Previous fines and settlements have gone to customers who suffered financial harm, which includes downgrades of their credit rating. The bank has also made additional payments in the past to settle complaints over mortgage abuses and the sale of unnecessary auto insurance.
In addition to the civil penalties, if the bank meets certain conditions for three years, the Justice Department has agreed to defer criminal prosecution. Authorities have noted that the bank has already made significant changes to its management and board of directors.