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Wells Fargo to Pay $575 Million Fine to all 50 states

Wells Fargo to Pay $575 Million Fineto all 50 states
Wells Fargo & Co. has agreed to pay $575 million to all 50 states and the District of Columbia to settle claims that a fake-account scandal in its retail bank and improper auto-loan and mortgage charges harmed customers.

The settlement, which requires court approval in certain states, follows a number of long-running investigations across the country focused on Wells Fargo’s sales practices and problems in its consumer-lending business, some of which date to 2002.

It is the latest in a string of settlements for the bank following revelations more than two years ago that Wells Fargo branch employees opened perhaps millions of fake accounts without customer knowledge.

Since then, problems have emerged in nearly every major business in the bank. The bank also has acknowledged it sold unnecessary insurance coverage to auto-loan customers and charged improper fees to mortgage customers.

“This agreement underscores our serious commitment to making things right in regard to past issues as we work to build a better bank,” Wells Fargo Chief Executive Timothy Sloan said in a statement.

The bank has paid out more than $4 billion in settlements and fines since September 2016, much of it stemming from problems that came to light following the sales scandal. (Earlier this year, the bank agreed to pay the Justice Department $2.09 billion over the sale of crisis-era mortgage-backed securities.)

Friday’s settlement marks a big development in Wells Fargo’s efforts to move beyond the sales scandal, but its troubles persist. The Justice Department and the Securities and Exchange Commission are investigating alleged problems in the bank’s wealth-management and foreign-exchange business, and Wells Fargo is barred from growing after an unprecedented reprimand from the Federal Reserve in February.

The settlement with the state attorneys general will include a customer redress program for those who may not have been refunded by the bank or other refund programs under settlements with federal regulators.

It also covers customers who were sold account add-on products such as life insurance, according to statements from state attorneys general on Friday. The Journal in July reported that the bank is in the process of refunding customers tens of millions of dollars related to those products, which also include pet insurance and legal services.

California will get the highest payout in the deal — about $150 million — due to the number of affected customers, according to a person familiar with the settlement. Wells Fargo is based in San Francisco.

“Instead of safeguarding its customers Wells Fargo exploited them, signing them up for products — from bank accounts to insurance — that they never wanted,” California Attorney General Xavier Becerra said in a statement.

Wells Fargo’s problems erupted in September 2016 when the bank paid a $185 million settlement to regulators and a city official over sales practices within its retail bank. It has since refunded customers roughly $150 million stemming from the fake-account openings.

Problems later emerged in its consumer-lending business, particularly with auto loans and mortgages.

In April 2018, the bank agreed to pay a $1 billion settlement to the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau related to improper charges to hundreds of thousands of consumers in its mortgage and auto-lending businesses.

In summer 2017, the bank acknowledged that it had forced nearly 600,000 auto-loan borrowers — among them active military service members — to pay for collision coverage they didn’t need, pushing 274,000 customers into delinquency on their loans, according to an internal report commissioned by the bank. Some 20,000 cars were wrongfully repossessed, the bank has said.

A few months later, the bank said it would refund customers who may have wrongfully paid fees to extend locked-in mortgage rates.

The bank has said it would refund around $450 million to auto-loan customers and some $100 million to mortgage customers.

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