$85 million to borrowers
The Federal Reserve Board has alleged that Wells Fargo employed deceptive mortgage practices, fraud and unsafe banking practices against thousands of borrowers and is issuing an $85 million fine, their largest ever consumer protection fine in Fed history.
The Fed says that “possibly more than 10,000” mortgage borrowers between 2004 and 2008 were pushed into higher cost loans when they would have qualified for lower rates and less expensive loans.
The fine for each individual case looks to be upward of $20,000 each as the Fed demanded that Wells Fargo fully compensate all customers that were cheated.
Where it all began
At the root of this major fine is “Wells Fargo Financial,” the subprime loan arm of Wells Fargo that was closed last year, with the Fed pointing to salespeople in this division as overly aggressive and commission driven. The group “altered or falsified income documents and inflated prospective borrowers’ incomes to qualify those borrowers for loans that they would not otherwise have been qualified to receive,” according to the Federal Reserve.
The Wells Fargo Financial division sold high cost loans to those who easily qualified for lower cost loans.
Wells Fargo blames “small number of people” at bank
Because Wells Fargo estimates that of the 300,000 loans they made during that period, only an estimated 4% were abusive, the bank claims it was a small number of people that committed these abuses and the group doesn’t represent what Wells Fargo stands for.
Nonetheless, they will now be forced to work with the Fed to determine who the borrowers that were wronged are and appropriate compensation given.
Wells Fargo required to improve oversight
In a statement, the Fed said, “In addition to the monetary components of the settlement, Wells Fargo is required to improve oversight of its anti-fraud and compliance programs and incentive compensation and performance management policies for personnel who sell and underwrite home mortgage loans.”
16 employees banned from banking
The Fed noted that they have issued consent orders against 16 former Wells Fargo Financial sales personnel prohibiting them from becoming employed in the banking industry. The Fed said that they have “also issued a consent cease and desist order against another former Wells Fargo Financial sales person prohibiting future improper conduct.”
