Federal regulators fined Wells Fargo & Co. $1 billion Friday, punishing the San Francisco bank for abuses that hurt mortgage and auto loan borrowers, and for what regulators said was a pervasive and "reckless" lack of risk management.
The penalty, announced by the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, is the largest against a financial firm since President Donald Trump took office.
It's also one of the largest fines levied against any U.S. bank not related to the financial crisis and the first for the CFPB since Trump appointed Mick Mulvaney as interim director last year. In the months since, Mulvaney has been criticized by consumer advocates for trying to diminish the agency's powers.
The new fines dwarf the $185 million Wells Fargo agreed to pay to federal regulators and the Los Angeles city attorney's office in 2016 over the creation of accounts without customers' authorization.
The scandal over unauthorized accounts, a practice rooted in the bank's demanding sales goals, led to increased regulatory scrutiny at Wells Fargo by local, state and federal authorities and to wide-ranging internal reviews of bank practices.
In the year and a half since the September 2016 settlement, the bank has acknowledged other illegal or improper practices in its consumer lines of business, including forcing mortgage borrowers to pay fees the bank should have covered and requiring hundreds of thousands of auto loan borrowers to pay for insurance policies they did not need _ in some cases pushing them into default and leading to repossessions.
The OCC fined the bank $500 million. The CFPB said it fined an additional $1 billion but that it would count the OCC fine against that figure, meaning the bank will pay $500 million to each regulator.
The OCC, in a news release announcing the penalty, said it found the bank's risk management had been severely deficient, amounting to "reckless, unsafe or unsound practices." The CFPB's action was narrower, speaking only to the bank's mortgage and auto-loan problems.
Along with the monetary penalties, the bank will have to get regulators' approval on plans to repay customers, correct risk-management problems, hire senior executive officers and make board appointments. The OCC, in its order, also reserves the right to take further action against the bank.
The bank last week in its first-quarter earnings report said that it was negotiating with the OCC and CFPB over the latest penalties and warned they could total $1 billion to settle the mortgage and auto loan issues as well as "resolve matters regarding our compliance risk management program."
The statement did not say when a settlement might be finalized, but executives may have wanted to wrap up a deal this week in advance of the company's annual shareholder meeting, which is scheduled for Tuesday in Des Moines, Iowa.
In a statement Friday, Wells Fargo CEO Timothy Sloan said the regulatory actions "affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency."
The new fine is the second major enforcement action against the bank this year. The Federal Reserve in February said Wells Fargo had engaged in "widespread consumer abuses and other compliance breakdowns" and ordered the bank to cap its growth until it can prove to regulators that it will not endanger customers.
Former Fed Chair Janet Yellen, whose term atop the financial regulator ended the day after those sanctions were announced, described the bank's behavior as "pervasive and persistent misconduct."
The new penalties did not satisfy many of the bank's critics. Rep. Maxine Waters, D-Calif., who has called for breaking up Wells Fargo, said Friday that she was disappointed that regulators have not revoked the bank's charter or prosecuted executives.
"I have been clear in the past that fines are not sufficient in addressing the pattern of illegal behavior by Wells Fargo, and this action still does not put the bank's past behavior to rest," Waters said in a statement. "Steeper penalties are still necessary."
Sen. Sherrod Brown, D-Ohio, said he was glad to see the bank further penalized, but also estimated that Wells Fargo stands to gain many times the new fine in the form of lower taxes and proposed regulatory changes. The bank reported this year that the recently passed corporate tax cut saved it more than $3 billion in future tax liability alone.
"While these are substantial fines, they barely dent the almost $24 billion the (Trump) administration has and will provide Wells Fargo through tax cuts and proposed capital relief," Brown said in a statement.
Despite the size of Friday's penalty, Wells Fargo can easily absorb it. The bank earned $22.2 billion last year and last week reported $5.9 billion in this year's first quarter. On Friday, though, the bank said it was adjusting those first-quarter results to reflect the fines, cutting profit for the first three months of the year to $4.7 billion.
But more problems and regulatory actions could still arise, even as the bank has moved to institute new controls and change the makeup of its board.
In March, Wells Fargo reported that authorities have asked questions about its wealth-management business, which may have recommended inappropriate investments for customers, and about issues related to its foreign-exchange practice. Friday's penalties do not appear to resolve those inquiries.
At the bank's annual meeting next week, public officials including California Treasurer John Chiang and New York state Comptroller Thomas DiNapoli are expected to call for more changes at the company.
Chiang said he plans to ask bank shareholders to call for an end to Wells Fargo's use of forced-arbitration agreements, which bar customers from suing the bank. DiNapoli wants shareholders to ask for a report on the bank's incentive compensation systems.
In Friday's news release announcing the penalties, the agency also refers to itself as the Bureau of Consumer Financial Protection, a change from how it has been known since its creation, and used a new agency seal _ one with an eagle and a shield _ instead of the bureau's more commonly used logo, which shows the letters CFPB with a beam of light coming from the C.
