Wells Fargo & Co. may face new sanctions from a federal regulator over bad practices the bank has over the past last several months, including forcing auto loan customers into unneeded insurance policies and charging improper fees on some mortgage borrowers, the Wall Street Journal reported this week.
The Journal said the Office of the Comptroller of the Currency, one of the regulators that last year fined Wells Fargo for its creation of sham bank accounts, has told the San Francisco-based bank-holding company’s board that it may face a new formal reprimand for willingly harming customers and failing to correct problems in its mortgage and auto-lending businesses.
The report, which cited unidentified sources, suggested the OCC may issue a cease-and-desist order, a regulatory action that demands a bank stop certain practices and take corrective action.
Such orders are sometimes accompanied by big fines. When federal regulators and the Los Angeles city attorney’s office reached a $185 million settlement with Wells Fargo last year over its sham-accounts scandal, that sum included a $35 million fine required by an OCC cease-and-desist order.
A spokesman for the OCC said the agency does not comment on “supervisory matters pertaining to specific banks.”
Wells Fargo spokeswoman Catherine Pulley said she could not comment on any specific interactions with the bank’s regulators.
The potential OCC action focuses on two lines of business in which Wells Fargo has admitted to bad practices that hurt customers.
In July, the bank said an internal investigation found that about 570,000 auto loan customers may had been forced to pay for auto insurance policies they didn’t need and that about 20,000 may have had their vehicles repossessed because the added cost of the unneeded policies pushed them into default.
The policies in question are those put in place by lenders when borrowers don’t have or can’t prove they have auto insurance of their own. However, the Wells Fargo borrowers either had their own insurance or were not properly informed about the bank-placed policies.
In October, the bank acknowledged that some mortgage borrowers may have been pushed to pay interest rate-lock fees that should have been paid by the bank. Those fees are owed when a mortgage application is delayed, and are supposed to be paid by borrowers only if they are responsible for the holdup.
The rate-lock issue was first reported by ProPublica, and later led to lawsuits and an investigation by the Consumer Financial Protection Bureau.
In both instances, the bank said it was taking corrective action and would repay hurt customers.
Wells Fargo pledged to pay $80 million in refunds and other compensation to auto loan customers going back to 2012. Last month, it said it would offer refunds to mortgage borrowers who paid rate-lock fees dating back to 2013.
