WASHINGTON, D.C. – Attorney General Karl A. Racine today announced that Wells Fargo Bank N.A. will pay $575 million in a 50-state settlement for, among other unfair and deceptive trade practices, opening millions of unauthorized accounts and enrolling customers into online banking services without their knowledge or consent. As part of this settlement, Wells Fargo will pay the District a total of $1,112,853.08. As part of previous settlements with federal regulators and an agreement resolving a private class-action consumer lawsuit, Wells Fargo will provide more than $600 million in relief to harmed consumers and pay more than $1 billion in civil penalties to the federal government.
Wells Fargo N.A. is a South Dakota-based entity that is a subsidiary of Wells Fargo & Company, the San Francisco-based multinational financial services company that is considered one of the United States’ “big four” consumer banking firms (along with Bank of America, Citigroup, and JPMorgan Chase). Wells Fargo N.A. sells multiple financial services, including banking, auto loans, and home loans.
The multistate investigation that led to the settlement uncovered evidence that Wells Fargo had deceived millions of customers across the country in multiple ways. The states alleged that Wells Fargo imposed aggressive and unrealistic sales goals on bank employees and implemented an incentive compensation program where employees could qualify for credit by selling certain products to customers. The states further alleged that the bank’s sales goals and the incentive compensation program created an impetus for employees to engage in improper sales practices in order to satisfy such sales goals and earn financial rewards. Those sales goals became increasingly harder to achieve over time, the states alleged, and employees who failed to meet them faced potential termination and career-hindering criticism from their supervisors.
The settlement resolves allegations that Wells Fargo harmed consumers by:
- Opening millions of unauthorized accounts: Wells Fargo has identified more than 3.5 million accounts where customer accounts were opened, funds were transferred, credit card applications were filed, and debit cards were issued without the customers’ knowledge or consent. The bank has also identified 528,000 online bill pay enrollments nationwide that may have resulted from improper sales practices at the bank.
- Improperly enrolling customers in insurance programs: Wells Fargo improperly submitted more than 6,500 renters insurance and/or simplified term life insurance policy applications and payments from customer accounts without the customers’ knowledge or consent.
- Charging auto loan customers for redundant insurance: Wells Fargo unlawfully charged premiums, interest, and fees for collateral protection insurance to more than 2 million auto financing customers, despite evidence that the customers’ regular auto insurance policies were in effect, and despite numerous customer complaints about such unnecessary placements. Wells Fargo has agreed to provide remediation of more than $385 million to approximately 850,000 auto finance customers. The remediation will include payments to more than 51,000 customers whose cars were repossessed.
- Failing to ensure customers received refunds: Wells Fargo failed to ensure that customers received proper refunds of unearned portions of optional financial products sold as part of auto financing agreements. As a result, the bank has agreed to provide refunds totaling more than $37 million to auto finance customers.
- Unlawfully charging mortgage customers extension fees: Wells Fargo improperly charged residential mortgage loan consumers for rate lock extension fees even when the delay was caused by Wells Fargo, a practice contrary to the bank’s policy. Wells Fargo has identified and contacted affected consumers and has refunded or agreed to refund over $100 million of such fees.
The settlement with the District resolves allegations that Wells Fargo violated the District’s Consumer Protection Procedures Act, which prohibits companies from engaging in unfair and deceptive trade practices. As part of today’s multistate action, Wells Fargo is required to:
- Pay $1,112,853.08 to the District: Wells Fargo will pay the District of Columbia $1,112,853.08, which represents in part the District’s costs in connection with this investigation. This payment is part of the $575 million multistate settlement. Most consumers harmed by Wells Fargo’s illegal practices have received relief as part of previous settlements with federal regulators and private class-action lawsuits.
- Establish a consumer redress review program: Wells Fargo is required to set up a program to determine if there are any consumers potentially eligible for redress that still have not been accounted for. Wells Fargo is required to create and maintain a website for consumers to use to access the program and will provide periodic reports to the states about ongoing restitution efforts.
More information on the redress review program, including phone numbers to reach specialists at Wells Fargo who are specially trained to help consumers as well as the Wells Fargo dedicated website address for the program will be available on or before February 26, 2019.
The multistate agreement with Wells Fargo is available at: http://oag.dc.gov/sites/default/files/2018-12/Wells-Fargo-Settlement-Agreement.pdf