Skip to content

Carrier Management

Critical Information for P/C Carrier Executives

Highlights

  • Weather the Talent Gap
  • Writing, Underwriting and Generative AI (Magazine Intro)
  • Broken Cyber Promises
  • Carrier Management
  • C-Suite
  • News
  • Research
  • Leadership
  • Markets
  • Regulation
  • Top 50
  • Members Only
  • Join
  • Login
  • Boardroom Agenda
  • CEO / Chief Executive
  • CFO / Financial
  • Underwriting
  • CTO / Technology
  • Risk
  • Brand Management & Sales
  • Investment Officers
  • Claims / Legal
  • Talent Management
Remote Work Saves Global Commuters 72 Minutes a Day: Study
Ranks of Quiet Quitters Climb as Layoffs Mount
  • U.S.
  • International
  • Industry News
  • Government
  • Technology & Science
Technology Trends Unpacked at Big “I” InsurTech Summit
Insurance Groundhogs Have Their Day: Some Primary Prices Need to Go Higher

See all News

  • Executive Spotlight
  • Innovation
  • Strategy
  • Leadership
  • Performance
  • Growth Initiatives
  • Social Responsibility
Insuring the Metaverse: Decoding Risk in a New World Opportunities Across the Metaverse for the Insurance Industry
Swiss Re Revamps Structure by Splitting Reinsurance Biz, Creating Client Business Unit
  • Reinsurance
  • Emerging Markets
  • Global Economy
  • Personal Lines
  • Commercial Lines
  • Specialty
Marsh: Global Commercial Insurance Pricing Up 4% in Q4 2022
Gallagher Re: InsurTech Funding Falls to Lowest Quarterly Level Since 2020
  • Insurance Regulation
  • Securities Regulation
  • Accounting & Tax
  • Rating Agencies
AM Best Downgrades California Earthquake Authority Credit Ratings
Recession Early Warning: More Misleading Earnings Reports
Laid Off Tech Workers Are About to Get Help—From Allstate
What to Expect: 7 InsurTech Predictions for 2023
The Perfect Storm: How Insurers Can Weather a Talent, Skills Gap
Conning: Embedded Insurance Market Could Exceed $70B in Premium by 2030

See all Top 50

FTX Liability Tentacles Spread Far
How Automation Can Help Manage the Underwriting Process
Insurance’s Wildfire Crisis: Three Keys for Rethinking Risk, Response
How Did You Make Them Feel?

See all Members Only Content

Benefits

  • News for the P/C Insurance C-Suite - Focused reporting from reliable sources and experienced financial journalists.
  • Research and Analysis Not Found Elsewhere - Exclusive content from researchers think tanks, industry experts and respected analysts.
  • High-Profile Peers - Interviews with thought leaders in the global and U.S. insurance industry.

Online Access

Complete, unrestricted access to the popular CarrierManagement.com website, which provides insurance company C-suite executives with daily news, white papers, advice, instruction and editorial on how to manage insurance companies more efficiently and more effectively.

Print Edition

4 quarterly issues of Carrier Management magazine every year.

Wells Fargo Will Fork Over $3B to Settle Consumer Abuse Allegations

Print Email
February 25, 2020 by Hannah Levitt and Tom Schoenberg
  • Article
  • 0 Comments

Wells Fargo & Co. will pay $3 billion to settle U.S. investigations into more than a decade of widespread consumer abuses under a deal that lets the scandal-ridden bank avoid criminal charges.

The deferred-prosecution agreement with the Department of Justice spares the company a potential conviction that can create serious complications for banks, if it cooperates with continuing probes and abides by other conditions for three years. The accord also resolves a complaint by the Securities and Exchange Commission.

Investigators found Wells Fargo’s overly aggressive sales targets led thousands of employees to open millions of bogus accounts for customers and foist other products on them from 2002 to 2016, often by creating false records or misappropriating their identities, the Justice Department said Friday. That generated millions of dollars in fees and interest and in some cases damaged customers’ credit ratings.

“Our settlement with Wells Fargo, and the $3 billion criminal monetary penalty imposed on the bank, go far beyond ‘the cost of doing business,'” U.S. Attorney Andrew Murray for the Western District of North Carolina said in a statement. “They are appropriate given the staggering size, scope and duration of Wells Fargo’s illicit conduct.”

The settlement is the bank’s largest yet from a series of scandals that claimed two chief executive officers. But for shareholders it’s in line with the more-than $3 billion the bank set aside for legal matters in the latter half of 2019 as negotiations progressed. It marks another step in efforts by CEO Charlie Scharf, who took over in October, to turn around the San Francisco-based lender as he conducts a review of all operations.

The shares climbed about 1% in extended trading after the accord was announced.

“The conduct at the core of today’s settlements — and the past culture that gave rise to it — are reprehensible and wholly inconsistent with the values on which Wells Fargo was built,” Scharf said in a statement Friday, outlining steps the bank has taken to reform over the past three years.

Still, it’s hardly the end of the legal woes. The firm remains under a growth cap imposed by the Federal Reserve. The Office of the Comptroller of the Currency announced civil charges last month against eight former senior executives, some of whom settled. Probes into allegations at other businesses are continuing.

And on Friday, House Financial Services Committee Chairwoman Maxine Waters announced she plans to have Scharf and Wells Fargo Chair Elizabeth Duke testify during a trio of hearings on the bank next month. Waters called the latest penalty disappointing, saying it “barely dents” the company’s profits from the period and is dwarfed by tax breaks the firm has since received under President Donald Trump’s administration.

“Despite today’s settlement, these hearings and the committee’s investigation will make clear that the problems at Wells Fargo remain unresolved,” the California Democrat said.

Scandals in Wells Fargo’s consumer operations erupted in 2016 with the revelation that employees may have opened millions of fake accounts to meet sales goals. The company’s expenses surged as new details emerged and as additional lapses and wrongdoing surfaced across business lines including mortgages and auto lending.

The company’s stock has suffered ever since, closing on Friday just below the level it was at when the problems emerged more than three years ago.

While the sales abuses have been described repeatedly in earlier probes, Friday’s settlement provides yet more details on the high-pressure environment that led legions of low-level employees to break the law — often costing them their jobs when they were caught by the firm’s internal controls. Many inside the bank referred to abusive sales practices as “gaming,” according to prosecutors.

That often included misappropriating customers’ identities to open checking and savings accounts, issue debit or credit cards, or enroll people in bill-pay or remittance services, prosecutors said. Employees sometimes forged client signatures, created PIN numbers to activate cards and moved money to simulate account funding. Some staff even altered contact information to prevent customers of learning about their unauthorized accounts or receiving satisfaction surveys.

Senior managers were aware of the issues as early as 2002, with one internal investigator describing it as a “growing plague” two years later, and another remarking that it was “spiraling out of control,” investigators found. Yet senior leaders in the community banking division refused to alter their sales model or ratchet down unrealistic targets. They later minimized the problems to higher-ups and the board, blaming them on rogue employees, prosecutors said.

The deal includes a $500 million payment to the SEC, which granted the bank a waiver to continue private placements of securities to accredited investors such as hedge funds. The settlement doesn’t resolve any criminal or civil liability for individuals, according to a senior Justice Department official.

“This resolution is with respect to the bank only,” U.S. Attorney Nick Hanna told journalists in Los Angeles. “The investigation is ongoing.”

The Justice Department said it considered Wells Fargo’s cooperation and prior settlements when deferring prosecution. The bank previously paid more than $1 billion to federal regulators for consumer mistreatment, $575 million to 50 states and the District of Columbia and $480 million for an investor class-action lawsuit.

–With assistance from Edvard Pettersson, Steve Dickson and Josh Friedman.

Copyright 2023 Bloomberg.
Print Email
Claims / LegalCommercial LinesLitigation/Liability TrendsMarketsNewsRiskU.S.Underwriting

Was this article valuable?

Thank you! Please tell us what we can do to improve this article.

Thank you! % of people found this article valuable. Please tell us what you liked about it.

Here are more articles you may enjoy.

Conning: Embedded Insurance Market Could Exceed $70B in Premium by 2030
Insurance’s Wildfire Crisis: Three Keys for Rethinking Risk, Response
Insured Losses For Calif. Floods $3.5-$6.5B Below Total Loss: RMS
Predictive Experiences Help Carriers Maximize the Value of Every Website VisitorThey’ll Be Back: RenRe CEO Predicts Cedent Demand for Re Limit Will Rise

Related Articles

Wells Fargo Loses Bid to Dismiss Shareholder Fraud Claims Over Its Recovery From Scandals
SCOTUS Won’t Revive Wells Fargo Accounts Scandal Suit
Wells Fargo CEO Insists Scandals, Risk Management Woes in Past; Regulator Disagrees
Wells Fargo Discloses Rising Legal Risks as Sales Abuse Settlement Talks Proceed
Wells Fargo Will Pay at Least $385M to Settle Auto Insurance Scam
Ex-Wells Fargo Official to Join AIG in Security Leadership Role; Three Nominated to Board
USAA Wins Against Wells Fargo in Mobile Deposit Tech Patent Verdict

Our Contributors

Mike KeeganRealtor, Auto Dealer Partnerships Offer New Revenue Streams to P/C Insurers
Benjamin StearnsIs the Broken Florida Homeowners Insurance Market Finally Fixed?
Dan WoodsFive Lessons for Carriers to Launch Innovative Insurance Products
Martha NotarasWhat to Expect: 7 InsurTech Predictions for 2023
Jason KeckHow Automation Can Help Manage the Underwriting Process
Oliver BrewCyber Insurance Themes to Look Out for in 2023
See All Our Contributors

Free Newsletter

NewsletterSign up to receive daily news!

Our Contributors

Martha NotarasWhat to Expect: 7 InsurTech Predictions for 2023Dan WoodsFive Lessons for Carriers to Launch Innovative Insurance ProductsJason KeckHow Automation Can Help Manage the Underwriting ProcessOliver BrewCyber Insurance Themes to Look Out for in 2023See All Our Contributors

News

  • Technology Trends Unpacked at Big “I” InsurTech Summit
  • Insurance Groundhogs Have Their Day: Some Primary Prices Need to Go Higher
  • Marsh: Global Commercial Insurance Pricing Up 4% in Q4 2022
  • Gallagher Re: InsurTech Funding Falls to Lowest Quarterly Level Since 2020
  • The Latest Launches from ExecutivePerils, Corvus, Hippo
  • Swiss Re Revamps Structure by Splitting Reinsurance Biz, Creating Client Business Unit
  • C-Suite
  • News
  • Leadership
  • Markets
  • Regulation
  • Top 50
  • Members Only
  • Videos

Headlines

  • Weather the Talent Gap
  • Writing, Underwriting and Generative AI (Magazine Intro)
  • Broken Cyber Promises

Resources

  • Videos / Podcasts
  • Contributors

Popular Topics

  • Boardroom Agenda
  • Technology
  • Financial
  • News

Brand Spotlight

  • AgentSync
  • Majesco
  • Notion
  • Origami Risk
  • Verisk
  • Vertafore

Connect with us

  • Email Newsletters
  • Twitter
  • Facebook
  • LinkedIn Group
  • Do Not Sell My Info

Carrier Management

  • Submit Content
  • Advertise
  • Subscribe
  • Contact Us

Wells Media Group Network

  • Carrier Management iconCarrier Management
  • Insurance Journal iconInsurance Journal
  • Claims Journal iconClaims Journal
  • IJ Academy iconInsurance Journal Academy
  • Insurance Journal TV iconInsurance Journal TV
  • MyNewMarkets.com iconMyNewMarkets.com
© 2023 by Wells Media Group, Inc. Privacy Policy | Terms & Conditions | Site Map

We have updated our privacy policy to be more clear and meet the new requirements of the GDPR. By continuing to use our site, you accept our revised Privacy Policy.