On Friday, April 20, 2018, regulators announced a $1 billion fine against Wells Fargo over claims of misconduct and poor oversight in the auto lending and mortgage lending channels of Wells Fargo’s business. This $1 billion settlement with the Consumer Financial Protection Bureau (“CFPB”) and Office of the Comptroller of the Currency was in response to investigations that found Wells Fargo failed to catch or prevent improper charges to consumers.
Experts have posited that the myriad regulatory issues that have afflicted Wells Fargo are the result of poor internal controls and incentive structures – employees were given aggressive sales and account opening targets to achieve, and were bonused based on hitting specific hurdles. This aggressive payout system, while common in the industry, appears to have had particularly negative consequences at Wells Fargo, where some employees essentially defrauded both consumers and Wells Fargo itself by receiving performance bonuses based on fraudulently opened accounts or fees charged.
Wells Fargo has faced continual and mounting regulatory pressure, with a $185 million penalty in September 2016 for the fraudulent opening of 3.5 million accounts. In February 2018, the Federal Reserve took the unprecedented enforcement action of issuing a cap on Wells Fargo’s assets, citing regulatory oversight issues.
While this settlement was specific only to Wells Fargo’s auto lending and mortgage lending businesses, in late 2017 the Justice Department announced an investigation into Wells Fargo Wealth Management Division (“WFA”), that may yet reveal more abuses and oversight issues. In addition to the customers who may have suffered from Wells Fargo’s unsuitable/and or fraudulent actions, Financial Advisors who transitioned to WFA unaware of the systemic problems there, may also have suffered damages.
The attorneys at Lax & Neville LLP have extensive experience in successfully prosecuting claims on behalf of customers who have suffered losses as a result of investment and securities fraud. If you are a victim of fraud, please contact Lax & Neville LLP today at (212) 696-1999 to schedule a consultation.