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Wells Fargo & Co (NYSE: WFC) has agreed to pay a $1-billion fine to the government related to abusive lending and auto insurance practices.
Wells Fargo said Friday that it has agreed to a $1-billion settlement with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency that will reduce the company’s $5.9-billion in first-quarter profits by $800 million.
Wells Fargo committed violations related to its mandatory auto loan insurance program and charges for mortgage interest rate lock products, according to the CFPB. As part of the settlement, Wells Fargo agreed to change its policies and reimburse customers who were impacted.
“While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency,” Wells Fargo CEO Tim Sloan said in a statement.
Why It’s Important
Wells Fargo has been dealing with regulatory fallout for nearly two years after employees were exposed for creating fraudulent accounts for millions of customers in an attempt to hit aggressive sales targets. The bank was fined $185 million in September 2016 in response to the accounts scandal. The bank also fired 5,300 employees and replaced CEO John Stumpf with Sloan.
Earlier this year, the Federal Reserve restricted Wells Fargo from growing its assets beyond its $2-trillion size until it can demonstrate is has adequately addressed “widespread consumer abuses.”
Some Americans were critical of the fine as yet another slap on the wrist for abuses from huge financial institutions.
Wells Fargo stock traded higher by 2 percent on Friday on investor optimism that, with legacy problems now behind the company, the regulatory environment could soon be much more favorable for big banks. The Trump administration has proposed cutting the funding for the CFPB — the agency created to police the financial sector following the 2008 financial crisis — by 0 million, or roughly 25 percent of its budget.
In addition, Republicans in the Senate passed a bank deregulation bill just last month.
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