Feb 21, 2020 - Economy & Business

Wells Fargo agrees to pay $3 billion to settle consumer abuse charges

Clients use an ATM at a Wells Fargo Bank in Los Angeles, Calif. Photo: Ronen Tivony/SOPA Images/LightRocket via Getty Images

Wells Fargo agreed to a pay a combined $3 billion to the Justice Department and the Securities and Exchange Commission on Friday for opening millions of fake customer accounts between 2002 and 2016, the SEC said in a press release.

The big picture: The fine "is among the largest corporate penalties reached during the Trump administration," the Washington Post reports.

Details: $500 million will go to the SEC. Under this settlement, Wells Fargo acknowledges that it "forged signatures and misused customers’ personal information in order to meet unrealistic sales goals," the Post reports.

Flashback: The bank was charged $575 million in 2018 for the fake-account scandal — and after it paid $2.1 billion in 2018 for its role in selling subprime mortgages prior to the financial crisis. The fine announced on Friday is in addition to these penalties.

What they're saying:

“Wells Fargo repeatedly misled investors, including through a misleading performance metric, about what it claimed to be the cornerstone of its Community Bank business model and its ability to grow revenue and earnings.”
— Stephanie Avakian, co-director of the SEC’s Division of Enforcement, in a statement on Friday
"Over the past three years, we’ve made fundamental changes to our business model, compensation programs, leadership and governance. While today’s announcement is a significant step in bringing this chapter to a close, there’s still more work we must do to rebuild the trust we lost. We are committing all necessary resources to ensure that nothing like this happens again, while also driving Wells Fargo forward."
— Wells Fargo CEO Charlie Scharf in a Friday statement

Go deeper: Six of the biggest U.S. banks have weaknesses in their crisis plans

Go deeper

Wells Fargo CEO pitches new beginning for the bank

Wells Fargo CEO Charlie Scharf. Photo: Win McNamee/Getty Images

Charlie Scharf is the third CEO in three years to try to wrangle Wells Fargo out of the bad graces of regulators, lawmakers and consumers.

The big picture: Wells Fargo is facing bipartisan anger over its fake accounts scandal. Scharf spent four hours in front of Congress on Tuesday pitching a new vision of the bank, with the worst behind it.

The banking industry's fake account scheme may have been widespread

Photo: Robert Alexander/Getty Images

The latest bank in the crosshairs of the Consumer Financial Protection Bureau is Fifth Third Bancorp, which disclosed in a securities filing this week that the CFPB is targeting the bank for “alleged unauthorized account openings,” American Banker's Kate Berry reported.

Why it matters: Wells Fargo has faced billions in fines and penalties and had been held up as a singular example of corporate wrongdoing for its account fraud scandal, but the disclosure of the complaint against Fifth Third could mean that there are one or many other shoes to drop.

Two Wells Fargo board members resign

Elizabeth Duke, shown in Senate testimony in 2008. Photo by Joshua Roberts/Getty Images

The chair of Wells Fargo's board of directors, Elizabeth Duke, resigned under pressure Sunday, days before she was scheduled to testify on Capitol Hill about the bank's fake accounts scandal — as did a second board member, James Quigley, who was also going to be grilled by lawmakers.

Why it matters: Wells Fargo is attempting to close the chapter on the systemic frauds that were exposed in 2016, when 5,200 employees were fired over 2 million fake accounts that were created. Evidence shows the bank did not satisfactorily clean up its act in the ensuing years, leaving Democratic lawmakers furious.