Wells Fargo $1B Settlement Breaks CFPB Record
Breaking records is usually a good thing. However, when a company breaks a record for paying out the largest settlement in a particular government agency's history, it might not actually be something to be proud of, especially if that settlement is related to violations of consumer protection laws.
However, for Wells Fargo, the recent record breaking billion-dollar settlement might not actually be that bad for the banking behemoth. Given the high settlement value, a judgment could have actually been more than the drop in the bucket that a single billion represents to the bank with total holdings at nearly $2 trillion. For context, a billion dollars is not even 0.1 percent of two trillion, it's half that.
Big Settlements Avoid Bigger Judgments
While a ten figure settlement is beyond most corporate law departments' wildest dreams or worst nightmares, for Wells Fargo, the news is actually being credited with helping the stock price increase. Wells Fargo announced that the settlement only knocks off $800 million from its first quarter profits, which routinely count into the billions.
The case settles claims that the bank assessed fees for locking in home mortgage interest rates as well as required "mandatory" insurance for car loans. Fortunately, for the borrowers who actually paid these fees, the settlement will reimburse those fees plus interest. It is estimated that there will be $145 million refunded to those with car loans, and nearly $100 million to home mortgagees.
Curiously, Wells Fargo began sending reimbursement checks out last December to the affected mortgagees, while those with auto loans started receiving checks back in August.
Public Image Problems
Since 2016, Wells Fargo has taken a serious reputational hit that is only just now beginning to recover. When the news about the fake account fraud broke, media coverage could hardly be avoided, and consumers flocked to other banks in droves.
However, as part of this recent settlement, the Office of the Comptroller dropped Wells Fargo's "troubled" designation, which will help former employees who hope to actually receive the severance packages they were promised. The OCC troubled designation required review of severance in order to prevent exiting execs from receiving bonuses related to the scandal.
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