The settlement, which includes the largest fine ever imposed by the Consumer Financial Protection Bureau, allows the bank to resolve claims that it had harmed millions of consumers since 2011.
Wells Fargo’s yearslong mistreatment of its customers has resulted in another record-breaking fine and a warning that more restrictions on its ability to do business could soon follow.
On Tuesday, the bank agreed to pay a $1.7 billion fine and another $2 billion in damages to settle claims that it engaged in an array of banking violations over the last decade that harmed millions of consumers, the Consumer Financial Protection Bureau said.
The bank misapplied customer payments on home and auto loans, wrongfully repossessed some borrowers’ cars and homes and charged overdraft fees even when customers had enough money to cover purchases they made with their bank cards, according to an order filed by the consumer protection bureau. Wells Fargo stopped the conduct this year as part of a larger effort to clean up other abusive practices stretching back to 2011, the filing said.
The fine is the largest ever imposed by the regulator, breaking a previous record of $1 billion, also set by an action against Wells Fargo.
The settlement allows the bank to address one of a series of a crises that led to the ouster of its previous chief executive, Timothy Sloan, in 2019. Mr. Sloan took the top post to help clean up the bank’s reputation, which was reeling from self-inflicted scandals, but he became a lightning rod for criticism and was replaced after three years on the job by Charles W. Scharf.
But the bank must still contend with other regulatory challenges, including a consent order imposed by the Federal Reserve in 2018 that restricted its growth until it fixed its many problems, and limits on its mortgage servicing abilities levied in 2021 by the Office of the Comptroller of the Currency for similar reasons.
The consumer protection bureau’s director, Rohit Chopra, told reporters on Tuesday that the action against the bank “should not be read as a sign that Wells Fargo has moved past its longstanding problems or that the C.F.P.B.’s work here is done.”
As part of its settlement with the regulator, Wells Fargo has also been repaying customers, returning improperly charged fees and offering some financial relief to those whose finances and credit ratings were hurt by the bank’s practices.
The damages, some of which the bank has already begun to pay out, include returning overpayments on home and auto loans; restoring the value that customers lost when the bank took away their cars and foreclosed on their homes; and returning money it improperly kept after offering auto loan customers “Guaranteed Asset Protection” insurance, which would cover the difference between their outstanding loans and their vehicles’ value if totaled or repossessed.
Redress in some categories has already started flowing to victims of the bad practices, but other parts of the $2 billion in payments are new, including an imperative to repay $205 million in overdraft fees.
In a statement on Tuesday, bank officials emphasized that the latest agreement with the regulator showed the bank’s progress in improving its business practices.
“This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us,” Mr. Scharf said in the statement. Wells Fargo is “a different company today,” he added.
The consumer protection bureau warned that the bank would be closely monitored as it worked to end and repair its latest violations, and that it would examine whether other restrictions on the bank’s activities were needed. Mr. Chopra said in a statement that the bureau would work with other bank regulators, including the Federal Reserve and the Office of the Comptroller of the Currency.
The fine also covers improper mortgage and auto loan fees that Wells Fargo charged customers, as well as the bank’s practice of freezing customers’ bank accounts too quickly and closing them when automatic fraud detection systems flagged unusual activity. Some of the practices began as early as 2011, but almost all continued well beyond the bank’s initial reckoning with regulators over its widespread violations, which began in 2016.
“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” Mr. Chopra said in the regulator’s statement. “This is an important initial step for accountability and long-term reform of this repeat offender.”
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