Maryland will receive a portion of a $575 million settlement between Wells Fargo and all 50 states and the District of Columbia to settle claims the bank violated state consumer protection laws, state Attorney General Brian E. Frosh’s office announced Friday.
The states claim the bank, which has been at the center of several scandals in recent years, opened millions of unauthorized accounts and enrolled customers in online banking services without their knowledge or consent and improperly referred customers to third-party renters and life insurance policies, among other practices related to Wells Fargo’s auto loans and mortgages.
“Wells Fargo cheated its customers. It misled them. It created phony accounts. It charged illegal fees,” said Attorney General Frosh in a press release. “Wells Fargo’s outrageous conduct requires punishment, and today we hold them accountable.”
Maryland will get more than $7.9 million in the settlement, the agreement states.
The state can use the settlement money only for consumer protection purposes, including enforcement, consumer education, monitoring enforcement of the agreement or, other public purpose allowed by state law, the agreement states.
As part of the settlement, Wells Fargo will create a consumer redress review program and respond to customer inquiries for those who believe they were affected by the bank’s actions and have not been made whole through other restitution measures. The program will be implemented within 60 days of the settlement.
Wells Fargo will also have a website explaining the bank’s current remediation efforts, provide contact information for consumers and give periodic updates, the agreement states.
“This agreement underscores our serious commitment to making things right in regard to past issues as we work to build a better bank,” said Wells Fargo CEO and President Tim Sloan in a statement.
The bank previously entered consent orders with the federal government, including the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, related to the alleged practices. Wells Fargo also has given customers more than $600 million in restitution under those orders. The Federal Reserve has ordered the bank to strengthen its corporate governance.
Wells Fargo created aggressive and unrealistic sales goals for bank employees as well as an incentive-based compensation program that encouraged employees to engage in improper sales tactics to meet sales goals and earn financial rewards, the states alleged.
Those tactics may have led to some 528,000 online bill payments across the country, the states alleged. Wells Fargo also may have improperly submitted more than 6,500 insurance or simplified term life insurance applications without the customers’ knowledge or consent, the states alleged.
Wells Fargo improperly charged premiums, interest and fees for force-placed auto insurance for collateral protection to more than two million customers, the states alleged. In addition, the states alleged the bank failed to make sure customers received refunds for unearned portions of Guaranteed Asset/Auto Protection (GAP) products sold as part of motor vehicle financing agreements.
The bank also allegedly charged improper fees to residential mortgage loan customers, which is contrary to the bank’s policies. Wells Fargo is in the process of refunding over $100 million of those fees, according to a news release.
Wells Fargo had accrued $400 million of the settlement amount as of the end of the third quarter 2018 and expects to accrue the remaining $175 million in the fourth quarter, the bank said.