Wells Fargo faces another setback with $1.7 billion penalty

Happy hump day. Dan DeFrancesco in the Big Apple, and I'm loving this New York story about the internet's newest obsession with nepotism in Hollywood. Wall Street, obviously, is no stranger to nepotism either, which made me curious: What's your favorite family lineage in finance? Drop me a line with some suggestions.

Today, we've got stories on the latest in the FTX debacle, layoffs at Tom Brady's crypto company, and why your chances of getting a new car for the holidays are looking slim.

But first, Wells Fargo heads to the penalty box, again.

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1. Wells Fargo faces the music.

The regulators have once again come knocking at Wells Fargo, and it ain't pretty.

Wells Fargo was ordered to pay $2 billion back to customers and pay a $1.7 billion civil penalty by the Consumer Financial Protection Bureau (CFPB) for illegal activity involving auto loans, mortgages, and deposit accounts that impacted over 16 million accounts.

Here's a rundown of what the CFPB investigation uncovered:

• Wrongfully repossessing borrowers' vehicles, in addition to incorrectly charging fees and interest on auto loans.
• Denying changes to mortgages that led to wrongful foreclosures on some customers' homes.
• Surprise overdraft fees, which occurred even though customers had enough money in their accounts.
• Freezing access to accounts due to a faulty automated filter, which led to customers being locked out of their account for, on average, two weeks.

And while $3.7 billion is quite a large amount of money, it's not unfamiliar territory for the bank.

Less than three years ago, Wells paid $3 billion to settle an investigation by the Justice Department and the Securities and Exchange Commission around its fake-account scandal, which involved employees setting up millions of fraudulent accounts for customers without their knowledge in an effort to meet unrealistic sales targets.

The latest fine won't come as a complete shock to the bank. Wells has already paid out $1.3 billion to 11 million accounts related to auto-loan-servicing issues, the CFPB said. Charlie Scharf, the bank's CEO, understood the mess he was getting when he took over the bank in 2019. (Check out our org chart on the changes that Scharf has made among Wells' leadership since he took over.)

But Scharf still needs to contend with an asset cap imposed by the Federal Reserve that limits the bank's growth. And as the fines continue to pile up, some will ask the question: Can Wells ever straighten itself out?

For Scharf's part, this is all part of a transformation that needed to take place at the bank.

"We have made significant progress over the last three years and are a different company today," Scharf said in a statement. "We remain committed to doing the right thing for our customers and working closely with our regulators and others to deal appropriately with any issue that arises."

But others, including the regulators themselves, might beg to differ.

"Wells Fargo is a corporate recidivist," CFPB Director Rohit Chopra told reporters on a call Tuesday, according to The Wall Street Journal, adding that the settlement "should not be read as a sign that Wells Fargo has moved past its longstanding problems."

Click here to read more about Wells Fargo's $3.7 billion settlement with the CFPB.

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Curated by Dan DeFrancesco in New York. Feedback or tips? Email [email protected], tweet @dandefrancesco, or connect on LinkedIn. Edited by Jeffrey Cane (tweet @jeffrey_cane) in New York and Hallam Bullock (tweet @hallam_bullock) in London.