The Consumer Financial Protection Bureau's $3.7 billion order against Wells Fargo on Tuesday includes some positives for the bank.
It acknowledges progress made under CEO Charlie Scharf in returning money to millions of consumers the bank harmed over the years. And in analysts' view, it is one more step forward on what has been a long and rocky path of trying to fix Wells Fargo's lengthy list of regulatory problems.
But the enforcement action also came with a warning from CFPB Director Rohit Chopra: The agency isn't pleased with the bank's overall progress and may have more to say on the matter.
In a call with reporters, Chopra said the
"While $3.7 billion may sound like a lot, the CFPB recognizes that this alone will not fix Wells Fargo's fundamental problems," Chopra said in prepared remarks. "Over the past several years, Wells Fargo executives have taken steps to fix longstanding problems, but it is also clear that they are not making rapid progress."
For starters, Chopra noted the CFPB's actions do not give "immunity" from penalties to any current or former executives at Wells Fargo for any violations the agency flagged. In its consent order, the CFPB said the $1.9 trillion-asset bank over the years wrongfully foreclosed on homes, illegally repossessed vehicles and charged deposit customers surprise fees.
Chopra also blamed the bank's recent
"As regulators, we must collectively consider whether additional limitations need to be placed on Wells Fargo," Chopra said, noting those actions would "supplement" the
What exactly Chopra meant is far from clear, and a senior CFPB official told reporters the agency does not comment on confidential supervisory or enforcement matters. An agency spokesperson also declined to elaborate on Chopra's comments.
Asked about the comments, a Wells Fargo spokesperson said: "As we've said before, the new leadership team has been working to address issues and, as part of that work, we identify items or areas of potential concern. To the extent issues are identified, we remediate as appropriate."
Scharf, who was brought in as Wells Fargo's CEO in late 2019, said in a news release Tuesday that Wells Fargo is a "different company today" after the progress it has made over the last three years.
"This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us," Scharf said. As another sign of progress, Scharf pointed to the CFPB's removal on Tuesday of a separate consent order from 2016 that covered the bank's student loan servicing practices, along with a few other consent orders that it has resolved under his tenure.
The CFPB's consent order noted progress under Scharf's time atop Wells Fargo, saying that since 2020, the company has "accelerated corrective actions and remediation."
The agency also modified a related
Under the settlement announced Tuesday, the San Francisco-based company will pay a $1.7 billion penalty, which will go to the CFPB's victims relief fund. The fine is easily the largest the bureau has ever assessed.
The bank is also on the hook to pay more than $2 billion to harmed customers. A Wells Fargo spokesperson said much of the latter payment is already complete, and a senior CFPB official told reporters that the agency will track the process closely to ensure the remaining customers get the money they deserve.
Sen. Sherrod Brown, an Ohio Democrat who chairs the Senate Banking Committee, hailed the CFPB's action and said it shows "what happens when you have an agency on the side of working families, not Wall Street and big corporations."
The advocacy group Better Markets, meanwhile, credited the agency for pursuing a hefty fine but said the scope of the violations means it's "past time for financial regulators to determine if Wells Fargo should be broken up."
Wells Fargo's stock price dropped nearly 2% to $40.98 after the announcement, as investors absorbed the bigger-than-expected penalty.
In its news release, Wells Fargo said it expects its fourth-quarter results to include roughly $3.5 billion in operating losses — the line item where the bank counts its spending on lawsuits, fines and consumer restitution. Last quarter's addition of $2.2 billion in operating losses was the
The fine announced Tuesday was not a massive surprise, but it ended up being larger than "anyone would have anticipated," said David Long, an analyst at Raymond James.
Bloomberg News had reported in November that Wells was facing pressure from the CFPB to pay more than $1 billion to settle multiple investigations. The company's latest quarterly filing to investors referred to a looming settlement and heightened legal costs, but did not provide specific amounts.
Wells Fargo's size means it is able to "digest" the large fine and removes another unknown for the company, Long said. The bank continues to operate under several regulatory consent orders, including the nearly five-year-old asset cap, which restricts the bank from growing.
Despite the vague warning from Chopra, the settlement with a CFPB is a sign of progress in Wells Fargo's efforts to put its outstanding issues behind it and move away from a "state of complete uncertainty," said Isaac Boltansky, an analyst at the research firm BTIG.
"When we take a step back, the bank is in a far better position than it was just yesterday, let alone two years ago," Boltansky said.
