Wells Fargo Warns Of Possible $1B Fine For Overcharges
It could be several weeks before Wells Fargo and its investors know the final cost of settling federal regulatory investigations into allegations that it overcharged borrowers. Last week, the bank, with its east coast headquarters in Charlotte, acknowledged it could be as much as $1 billion.
That figure comes from Wells Fargo's earnings report for the first three months of the year, which came out last Friday. The company took the unusual step of calling the report "preliminary," saying it can't post official results until it completes negotiations with regulators.
Wells Fargo acknowledged that it is negotiating with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. CEO Tim Sloan told Wall Street analysts the problem is that Wells Fargo doesn't know how much it will have to set aside for penalties.
"At this time, we're unable to predict the final resolution of the CFPB/OCC matter and cannot reasonably estimate our related loss contingency," Sloan said Friday.
Regulators are investigating allegations that the bank overcharged consumers for auto loans and mortgages, specifically: charging auto loan borrowers for unneeded insurance and charging extra fees to lock in interest rates on mortgages. Regulators are also examining Wells Fargo's compliance risk management program.
The latest regulatory troubles add more uncertainty to the outlook for Wells Fargo. The company paid a $185 million fine in 2016 after it was caught signing up customers for credit card accounts they didn't request.
There's still a chance Wells Fargo will be able to negotiate a lower penalty than a billion dollars, but the fine is still likely to be significant.
"There's a strong reason to think that it will be the biggest penalty that the CFPB has ever charged," said Kevin Wack, a reporter with the American Banker newspaper. "And the biggest penalty that Wells Fargo has (been) charged in connection with all of these alleged consumer abuses over the last few years."
Those negotiations could wrap up in the next few weeks. Wells Fargo said it expects to post final first quarter numbers next month.
Regulators declined to comment.