Wells Fargo & Co. will have to pay an $85 million civil penalty for misleading borrowers into costly subprime loans, the Federal Reserve Board said Wednesday.
The Fed said the cease and desist order against the San Francisco-based bank holding company was the largest penalty the central bank has ever issued related to consumer-protection violations.
The agency's allegations included that sales personnel at Wells Fargo Financial were "steering" borrowers who could have been eligible for prime interest rate loans into more costly loans with higher subprime interest rates.
Additionally, the company's personnel allegedly falsified borrowers' income amounts in order to qualify for loans that they otherwise would not have received.
This is the first enforcement action undertaken by a regulatory agency against these types of alleged practices.