Wells Fargo Could Be Fined $1 Billion For Abusing Car Loans and Mortgages
Wells Fargo may be forced to pay a $1 billion fine due to investigations into its mortgage and car insurance loan abuses.
Two U.S. regulators proposed the penalties following the banks’ reports of a first quarter profit, according to Reuters. Analysts told the outlet that the $1 billion fine is not expected to badly damage Wells Fargo’s financial outlook, but could leave a stain on the bank’s character.
“Operationally, Wells Fargo can recover, but reputationally and how a billion dollars will weigh on them—only time can tell,” Art Hogan, chief market strategist at financial services firm B. Riley, told Reuters.
“Companies have come back from worse than this but right now they’re still in the eye of the storm,” Hogan added.
Last year, while still reeling from a highly-publicized account fraud scandal, Wells Fargo ran into issues with its auto lending and mortgage lending practices. The bank was accused of discriminating against minority borrowers by pushing them into unaffordable loans, which Wells Fargo employees were in turn rewarded bonuses for offering.
The inconsistencies led to more federal probes, prompting Wells Fargo to make sweeping changes across its structure, including the hiring of a new compliance officer and the departure of several board members.
Despite the shake up, the U.S. Federal Reserve this February imposed restrictions on Wells Fargo’s growth, preventing the bank from expanding its balance sheet until it made significant changes to its risk management strategy.