If you thought Wells Fargo & Co (ticker: WFC) provided you a service or product you didn’t ask for, you could have been correct. And now the company is paying the price, literally.
The bank settled with the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the Office of the Los Angeles City Attorney on account of these allegations. The settlements cost the company $185 million and an additional $5 million in customer remediation.
The Consumer Financial Protection Bureau’s fine alone was $100 million. The New York Times notes that’s the biggest fine of its kind from the agency.
Wells Fargo employees sent in applications for 565,000 credit cards and created about 1.5 million bank accounts — all of which might not have received customer approval, The New York Times reports, citing regulators. At least 5,300 employees linked to this process have been fired. The issues go as far back as 2011, federal banking regulators say.
According to regulators, the employees’ actions came from compensation reward motives for opening new accounts. “Unchecked incentives can lead to serious consumer harm, and that is what happened here,” Richard Cordray, director of the Consumer Financial Protection Bureau, told The New York TImes.
The scandal could sully the bank’s sterling reputation. “It is way out of character for one of the cleanest banks around,” Mike Mayo, a banking analyst at CLSA, told The New York Times. “It’s a head-scratcher why so many employees felt comfortable crossing the line.”
Customers received an average of $25 in refunds; regulators say that the financial impact may not have been strong, though it spoke to a culture problem for Wells retail.
“Our entire culture is centered on doing what is right for our customers,” CEO John Stumpf wrote in an email to Wells Fargo team members Thursday. “However, at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action.”
Wells Fargo stock is down about 8.5 percent on the year and remained little changed in early trading.
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Wells Fargo & Co Created Fake Accounts, Must Pay $185 Million in Fines (WFC) originally appeared on usnews.com
