The U.S. government’s consumer watchdog agency announced last month that it ordered Wells Fargo to pay $3.7 billion in connection with the bank’s previous wrongdoing, but a progressive activist who has protested greedy Wall Street practices and ‘too big to fail’ banks says the fine is letting the financial behemoth off too easily.
“Wells Fargo harmed over 16 million consumer accounts, so this adds up to a little more than $100 per victim,” said Lisa McCormick, a consumer advocate who challenged Senator Robert Menendez in the 2018 Democratic primary election.
The Consumer Financial Protection Bureau said Wells Fargo’s “illegal activity” included repeatedly misapplying loan payments, wrongfully foreclosing on homes, illegally repossessing vehicles, incorrectly assessing fees and interest, and charging surprise overdraft fees.
“There can be little doubt that Wells Fargo is a symbol of greed, so allowing the company to keep paying off regulators and then going back to business as usual is simply not justice,” said McCormick, who cited CEO salary as an indicator of this.
Wells Fargo CEO Charles Scharf’s total compensation for 2021 was $24.5 million, up nearly 20% from a year earlier. When Scharf was hired in September 2019, the bank calculated that his total pay was 550 times the median employee’s $65,931 in annual compensation.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said CFPB Director Rohit Chopra. “The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”
“Rohit Chopra recited the words but the agency’s actions contradict the principle of equal justice for all,” said McCormick.
The CFPB said Wells Fargo harmed millions of consumers over a period of several years, with violations across many of the bank’s largest product lines.
The CFPB’s specific findings include that Wells Fargo:
- Unlawfully repossessed vehicles and bungled borrower accounts: Wells Fargo had systematic failures in its servicing of automobile loans that resulted in $1.3 billion in harm across more than 11 million accounts. The bank incorrectly applied borrowers’ payments, improperly charged fees and interest, and wrongfully repossessed borrowers’ vehicles. In addition, the bank failed to ensure that borrowers received a refund for certain fees on add-on products when a loan ended early.
- Improperly denied mortgage modifications: During at least a seven-year period, the bank improperly denied thousands of mortgage loan modifications, which in some cases led to Wells Fargo customers losing their homes to wrongful foreclosures. The bank was aware of the problem for years before it ultimately addressed the issue.
- Illegally charged surprise overdraft fees: For years, Wells Fargo unfairly charged surprise overdraft fees – fees charged even though consumers had enough money in their account to cover the transaction at the time the bank authorized it – on debit card transactions and ATM withdrawals. As early as 2015, the CFPB, as well as other federal regulators, including the Federal Reserve, began cautioning financial institutions against this practice, known as authorized positive fees.
- Unlawfully froze consumer accounts and mispresented fee waivers: The bank froze more than 1 million consumer accounts based on a faulty automated filter’s determination that there may have been a fraudulent deposit, even when it could have taken other actions that would have not harmed customers. Customers affected by these account freezes were unable to access any of their money in accounts at the bank for an average of at least two weeks. The bank also made deceptive claims as to the availability of waivers for a monthly service fee.
Wells Fargo is a repeat offender that has been the subject of multiple enforcement actions by the CFPB and other regulators for violations across its lines of business, including faulty student loan servicing, mortgage kickbacks, fake accounts, and harmful auto loan practices.
McCormick previously called on the federal Justice Department to prosecute Wells Fargo executives in October 2016, and she has been a consistent advocate for a corporate death penalty law.
“Senators Bernie Sanders and Elizabeth Warren are not satisfied with the fines being imposed on a bank that defrauded thousands of customers, so they have written a letter to Attorney General Loretta Lynch, asking for a full investigation into senior Wells Fargo executives,” said McCormick at that time. “I want to join in support of that urging because too many of these greedy, rich bankers are getting away with crime.”
The letter from Sanders and Warren was co-signed by Senators Tammy Baldwin (D-Wisconsin), Richard Blumenthal (D-Connecticut), Richard Durbin (D-Illinois), Al Franken (D-Minnesota), Kirsten Gillibrand (D-New York), Angus King (I-Maine), Amy Klobuchar (D-Minnesota), Patrick Leahy (D-Vermont), Ed Markey (D-Massachusetts), Jeff Merkley (D-Oregon), Elizabeth Warren (D-Massachusetts), and Ron Wyden (D-Oregon).
“Americans are rightly frustrated when they see that justice for the wealthy and powerful is very different than justice for everybody else. A bank teller that takes a handful of bills from the cash drawer is likely to face charges for theft and prison time,” said the lawmakers in the letter. “She can’t hide behind an army of lawyers and corporate policies that diffuse accountability for those at the top. Meanwhile, an executive who oversees a massive fraud that implicates thousands of bank employees and costs customers millions of dollars can walk away with a hefty retirement package and millions in the bank. It’s no wonder that Americans are skeptical of the effectiveness of our criminal justice system.”
McCormick said the latest fine, albeit significant, is a drop in the bucket compared with the company’s $79 billion in revenue and nearly $2 trillion in assets.
The penalty would be equivalent to a fine of $3,700 for a middle-class person whose earnings are $79,000 but after dozens of previous crimes, no individual would be able to get away with that.