Wells Fargo Hit With $1 Billion In Fines Over Home And Auto Loan Abuses

NPR

The Consumer Financial Protection Bureau is levying a $1 billion fine against Wells Fargo — a record for the agency — as punishment for the banking giant’s actions in its mortgage and auto loan businesses.

Wells Fargo’s “conduct caused and was likely to cause substantial injury to consumers,” the agency said in its filings about the bank.  

Wells Fargo broke the law by charging some consumers too much over mortgage interest rate-lock extensions and by running a mandatory insurance program that added insurance costs and fees into some borrowers’ auto loans, the CFPB said.

The CFPB said Friday that the penalty is part of a settlement with Wells Fargo, which has pledged to repair the financial harm to consumers.

Because of the penalties, Wells Fargo says, it is adjusting its preliminary financial results for the first quarter of 2018, shifting $800 million in its balance sheet — and dropping its net income for the quarter to $4.7 billion.

The new federal action against the bank comes less than two years after Wells Fargo was fined $185 million over what the CFPB called “the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts.”

Those earlier penalties included a $100 million fine by the CFPB — a record at the time. The new punishment stems from the agency’s findings that Wells Fargo abused its relationship with home and auto loan borrowers.

Wells Fargo was also punished by the U.S. Office of the Comptroller of the Currency over its risk management practices, with the agency collecting a $500 million penalty as part of the fines announced Friday.

Along with treating its customers unfairly, the OCC said, Wells Fargo had failed to maintain a compliance risk management program that was appropriate for a bank of its size and complexity.

That failure, the OCC said, led Wells Fargo to “engage in reckless unsafe or unsound practices and violations of law.”

Auto loans, insurance and fees

Problems in the way the Wells Fargo auto loan unit handled consumers’ accounts exposed people to hundreds or thousands of dollars in premiums and fees. The issues were also found to have possibly contributed to thousands of cars being repossessed.

The CFPB said problems with the auto loan unit persisted for more than 10 years, from October 2005 to September 2016.

Lenders can require borrowers to maintain insurance on their vehicles — and if a borrower doesn’t do that, there is a process that allows lenders to arrange for what is called force-placed insurance and add that cost to the loan. But Wells Fargo acknowledged that of the roughly 2 million car loans that it put into that program, it “forcibly placed duplicative or unnecessary insurance on hundreds of thousands of those borrowers’ vehicles.”

For some borrowers, the bank also improperly maintained those force-placed policies on their accounts even after they secured adequate insurance.

According to the CFPB, “if borrowers failed to pay the amounts [Wells Fargo] charged them for the Force-Placed Insurance, they faced additional fees and, in some instances, experienced delinquency, loan default, and even repossession.”

In one five-year period from 2011 to 2016, Wells Fargo acknowledged in the settlement, the extra costs of force-placed insurance may have played a role in at least 27,000 customers having their vehicles repossessed.

Home loan rate locks

Wells Fargo failed to follow its own policies in how it charged fees over locking in mortgage interest rates beyond the standard guaranteed window, the CFPB said, adding that the bank charged customers for the rate extension — even in cases in which the bank itself was the reason for delays in closing on a home loan.

The problems persisted for several years after the bank’s internal audit identified the risk of harming consumers, according to the government’s filing about the settlement.

Wells Fargo unfairly and inconsistently applied its policy on rate-extension fees from September 2013 through February 2017, the agency said.

In February, Wells Fargo also faced a government reprimand in February, when the Federal Reserve took the rare step of “restricting Wells Fargo’s growth and demanding the replacement of four board members in response to ‘widespread consumer abuses and compliance breakdowns’ at the bank,” as NPR reported.

At the time, the Fed faulted Wells Fargo for maintaining a business strategy that prioritizes its own growth at the expense of risk management.

https://www.npr.org/sections/thetwo-way/2018/04/20/604279604/wells-fargo-hit-with-1-billion-in-fines-over-consumer-abuses

10 thoughts on “Wells Fargo Hit With $1 Billion In Fines Over Home And Auto Loan Abuses”

  1. This TOTALLY destroys Wells Fargo under the Clean Hands Doctrine:

    Clean hands doctrine. Cf. Contra bonos mores; Derision; Embarrassment; Shame; Unconscionable;

    Principle that one who has unclean hands is not entitled to relief in equity. Doctrine means no more than that one who has defrauded his adversary in the subject matter of the action will not be heard to assert right in equity. The doctrine has no application unless party’s wrongdoing has some proximate relation to the subject matter in controversy. Under the clean hands doctrine, a person who has acted wrongly, either morally or legally – that is, who has ‘unclean hands’ – will not be helped by a court when complaining about the actions of someone else. Unclean hands can be used as an affirmative defense in cases where the complaint is equitable. In family law, the doctrine is invoked most often in two situations. First, a parent who kidnaps and then later requests custody will often be denied custody unless the child is in danger of harm from the other parent. Second, a spouse who conceals assets or otherwise misappropriates marital property during the marriage or separation will often be penalized in the division of property at the divorce by being awarded less than her fair share. This, of course, requires that the innocent spouse learn of the concealment or misappropriation. North Pacific Lumber Co. v. Oliver, 286 Or 639, 657, 596 P2d 931 (1979); Kerr v. Miller, 159 Or App 613, 977 P2d 438, rev den 329 Or 287 (1999); Welsh v. Case, 180 Or App 370, 43 P3d 445, rev den, 334 Or 632 (2002); accord Bein v. Heath, 6 How. 228, 247 (1848) (‘the abetter of iniquity.’); N.B. Johnson v. Yellow Cab Transit Co., 321 U.S. 383, 387-388 (1944); Precision Instrument Mfg. Co. v. Automotive Maintenance Mach. Co., 324 U.S. 806, 814 (1945); McGrath v. Hilding, 363 N.E.2d 328, 41 N.Y.2d 625 (N.Y. 1977); Texaco Puerto Rico, Inc. v. Department of Consumer Affairs, 60 F.3d 867, 880 (1st Cir. 1995); Lazy M Ranch, Ltd. v. TXI Operations, LP, 978 S.W.2d 678, 683 (Tex. App. 1998); Japan Telecom, Inc. v. Japan Am., Inc. No. 00-56012 (9th Cir. 04/24/2002); Holland v. Ryan, 2003 NYSlipOp 15814 App.Div.4th (07/03/2003); National Coalition of Latino Clergy, Inc. v. Brad Henry, No. 07-CV-613-JHP (U.S.D.C. N. Dist. Ok. 12/12/2007); 5 Williston, Contracts [3d ed.] § 676; The Clean-Hands Doctrine in Oregon, 37 Or L Rev 160 (1958);

    Exodus, 20: 16 (Thou shalt not bear false witness against thy neighbour.);

    Leviticus, 6; 1 (And the LORD spake unto Moses, saying, 2If a soul sin, and commit a trespass against the LORD, and lie unto his neighbour in that which was delivered him to keep, or in fellowship, or in a thing taken away by violence, or hath deceived his neighbour; 3Or have found that which was lost, and lieth concerning it, and sweareth falsely; in any of all these that a man doeth, sinning therein: 4Then it shall be, because he hath sinned, and is guilty, that he shall restore that which he took violently away, or the thing which he hath deceitfully gotten, or that which was delivered him to keep, or the lost thing which he found, 5Or all that about which he hath sworn falsely; he shall even restore it in the principal, and shall add the fifth part more thereto, and give it unto him to whom it appertaineth, in the day of his trespass offering.);

    Ephesians, 4: 25 (Wherefore putting away lying, speak every man truth with his neighbour: for we are members one of another.);

    Institution of Cetacean Research v. Sea Shepherd Conservation Society, No. 12-35266 (9th Cir. 05/24/2013) (In suit brought under the Alien Tort Statute, by Japanese researchers who hunt whales alleging piracy against defendants, orders denying injunction and dismissing piracy claims are reversed and remanded, where the district court: 1) erred in dismissing plaintiff’s piracy claims because the activities that plaintiff alleges defendant has engaged in are clear instances of violent acts for private ends, the very embodiment of piracy; 2) abused its discretion in denying the injunction because a) plaintiff is likely to succeed on the merits, b) defendant’s dangerous acts if committed often enough, will inevitably lead to harm, which could easily be irreparable, c) the balance of equities favors plaintiff, and d) there is a strong public interest in the health of the marine ecosystem and the safety of international waterways; and 3) abused its discretion in denying the injunction based on unclean hands. (Amended opinion); http://cdn.ca9.uscourts.gov/datastore/opinions/2013/05/24/12-35266.pdf

    National Coalition of Latino Clergy, Inc. v. Brad Henry, No. 07-CV-613-JHP (U.S.D.C. N. Dist. Ok. 12/12/2007) (In focusing on the illegal alien Plaintiffs here, the Court is reminded that courts have customarily declined to entertain cases involving plaintiffs with “unclean hands.” Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 814 (1945). This equitable maxim—that “he who comes into equity must come with clean hands”—is a judicial closing of the courthouse doors to those tainted with inequitableness or bad faith related to the matter in which they now seek relief. Id.); http://www.tulsaworld.com/webextra/content/2007/pdfs/show_case_doc.pdf

    Welsh v. Case, 180 Or App 370, 43 P3d 445, rev den, 334 Or 632 (2002) (The Clean-Hands Doctrine in Oregon, 37 Or L Rev 160 (1958); http://159.121.112.45/A112310.htm

    Kerr v. Miller, 159 Or App 613, 977 P2d 438, rev den 329 Or 287 (1999) (The Streeters’ second contention is that, to the extent we weigh the equities between Kerr and the Streeters, we may consider only whether the Streeters “were at all culpable in creating Kerr’s predicament.” The settled law is to the contrary. In faithfulness to the familiar principle that one who seeks equity must do equity, a court is not limited to examining only the conduct that directly produces the right upon which a party sues–here, Kerr’s right to restitution based on his good faith but mistaken belief of his ownership and Miller’s acquiescence in his foreclosure rights. See North Pacific Lumber Co. v. Oliver, 286 Or 639, 657, 596 P2d 931 (1979) (discussing the scope of the “clean hands” doctrine). The test is only whether a party’s conduct bears some relationship to the transaction in question. Id. As the Supreme Court has cautioned, a court’s concern properly “is with the totality of the relationship as well as its beginnings.” Id. Accordingly, we reject the Streeters’ argument that we are limited to considering their role in “creating Kerr’s predicament,” as opposed to their role in attempting to complicate his predicament by encouraging Miller’s change in conduct and otherwise taking advantage of Kerr’s unsuccessful initial foreclosure.); http://159.121.112.45/A92500.htm

    Japan Telecom, Inc. v. Japan Am., Inc. No. 00-56012 (9th Cir. 04/24/2002) (Unclean hands will not act as a defense to trademark infringement under the Lanham Act where plaintiff did not use the mark to deceive customers, and a finding that mark is “primarily geographically deceptively misdescriptive” is improper on summary judgment; secondary meaning cannot be established where actual confusion is not shown.) http://caselaw.lp.findlaw.com/data2/circs/9th/0056012p.pdf

    Holland v. Ryan, 2003 NYSlipOp 15814 App.Div.4th (07/03/2003) (We nevertheless conclude that plaintiff is not entitled to summary judgment. “A more troublesome issue *** appears in the record” (Janke v Janke, 47 AD2d 445, 449, affd for the reasons stated 39 NY2d 786). Although the issue of unclean hands is not raised in opposition to the motion or, indeed, on appeal, the record contains [*3] sworn statements of defendants that the parties agreed to a side payment of $50,000 to enable plaintiff to avoid a higher assessed value for the property. Defendants’ sworn statements are sufficient to raise a triable issue of fact whether the basis of this action “is immoral and one to which equity will not lend its aid” (Muscarella v Muscarella, 93 AD2d 993, 993). Although defendants did not raise the issue of unclean hands in opposition to the motion or on appeal, this Court is not precluded from raising the issue sua sponte for the first time on appeal (see id. at 993-994; Janke, 47 AD2d at 449-450). This is done “not to favor defendant[s], but as a matter of public policy” (Janke, 47 AD2d at 450); http://www.courts.state.ny.us/reporter/slips/15814.htm

    Lazy M Ranch, Ltd. v. TXI Operations, LP, 978 S.W.2d 678, 683 (Tex. App. 1998) (Under the doctrine of unclean hands, a court may refuse to grant equitable relief to a plaintiff who has been guilty of unlawful or inequitable conduct regarding the issue in dispute.);

    Texaco Puerto Rico, Inc. v. Department of Consumer Affairs, 60 F.3d 867, 880 (1st Cir. 1995) (It is old hat that a court called upon to do equity should always consider whether the petitioning party has acted . . . with unclean hands. This consideration is rooted in the maxim that “he who comes into equity must come with clean hands.” Precision Instrument Mfg. Co. v. Automotive Maintenance Mach. Co., 324 U.S. 806, 814 (1945); http://laws.findlaw.com/us/324/806.html

    Schenk v. Halliday Real Estate, Inc., 803 S.W.2d 361, 366 (Tex. App. 1990) (It is well settled that a party seeking equity cannot come into a court with unclean hands.);

    McGrath v. Hilding, 363 N.E.2d 328, 41 N.Y.2d 625 (1977) (A promisee may not recover for a broken promise unless he has performed his obligations, usually categorized as a condition precedent (see 5 Williston, Contracts [3d ed.] § 676). Certainly, the promisee seeking to establish a constructive trust must show that he has not been guilty of an equivalent breach of the trust and fidelity upon which the constructive trust is to be based (see 20 N.Y.Jur., Equity, §§ 106-107));

    Precision Instrument Mfg. Co. v. Automotive Maintenance Mach. Co., 324 U.S. 806, 814 (1945) (The guiding doctrine in this case is the equitable maxim that ‘he who comes into equity must come with clean hands.’ This maxim is far more than a mere banality. It is a self-imposed ordinance that closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief, however improper may have been the behavior of the defendant. That doctrine is rooted in the historical concept of court of equity as a vehicle for affirmatively enforcing the requirements of conscience and good faith. This presupposes a refusal on its part to be ‘the abetter of iniquity.’ Bein v. Heath, 6 How. 228, 247. Thus while ‘equity does not demand that its suitors shall have led blameless lives,’ Loughran v. Loughran, 292 U.S. 216, 229, 54 S. Ct. 684, 689, as to other matters, it does require that they shall have acted fairly and [324 U.S. 806, 815] without fraud or deceit as to the controversy in issue. Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 245, 54 S.Ct. 146, 147; Johnson v. Yellow Cab Transit Co., 321 U.S. 383, 387, 64 S.Ct. 622, 624; 2 Pomeroy, Equity Jurisprudence (5th Ed.) 397-399. This maxim necessarily gives wide range to the equity court’s use of discretion in refusing to aid the unclean litigant. It is ‘not bound by formula or restrained by any limitation that tends to trammel the free and just exercise of discretion.’ Keystone Driller Co. v. General Excavator Co., supra, 290 U.S. 245, 246, 54 S.Ct. 147, 148. Accordingly one’s misconduct need not necessarily have been of such a nature as to be punishable as a crime or as to justify legal proceedings of any character. Any willful act concerning the cause of action which rightfully can be said to transgress equitable standards of conduct is sufficient cause for the invocation of the maxim by the chancellor. Moreover, where a suit in equity concerns the public interest as well as the private interests of the litigants this doctrine assumes even wider and more significant proportions. For if an equity court properly uses the maxim to withhold its assistance in such a case it not only prevents a wrongdoer from enjoying the fruits of his transgression but averts an injury to the public. The determination of when the maxim should be applied to bar this type of suit thus becomes of vital significance. See Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 492-494, 788, 62 S.Ct. 402, 405, 406.); http://laws.findlaw.com/us/324/806.html

    Johnson v. Yellow Cab Transit Co., 321 U.S. 383, 387-388 (1944) (We may assume that because of the clean hands doctrine a federal court should not, in an ordinary case, lend its judicial power to a plaintiff who seeks to invoke that power for the purpose of consummating a transaction in clear violation of law. [4] But this does not mean that courts must always permit a defendant wrongdoer to retain the profits of his wrongdoing merely because the plaintiff himself is possibly guilty of transgressing the law in the transactions involved.[5] The maxim that he who comes into equity must come with clean hands is not applied by way of punishment for an unclean litigant but ‘upon considerations that make for the advancement of right and justice.’ Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 245, 54 S.Ct. 146, 148. It is not a rigid formula which ‘trammels the free and just exercise of discretion.’ Ibid., 290 U.S. pages 245, 246, 54 S.Ct. page 148. [321 U.S. 383, 388] Therefore, before deciding the applicability of the maxim to the case at hand, we must examine the particular transactions and circumstances involved together with the federal laws which are alleged to taint these transactions with illegality. [4] See generally 2 Pomeroy’s Equity Jurisprudence, 5th Ed., 402, 403. Cf. Bentley v. Tibbals, 2 Cir., 223 F. 247, 252; Bonnie & Co. v. Bonnie Bros., 160 Ky. 487, 495, 169 S.W. 871. [5] See, e.g., Catts v. Phalen, 2 How. 376; Kinsman v. Parkhurst, 18 How. 289, 293; Stark v. Grant, Com.Pl., 16 N.Y. S. 526; Martin v. Hodge, 47 Ark. 378, 1 S.W. 694, 58 Am.Rep. 763.); http://laws.findlaw.com/us/321/383.html

    Rotge v. Dunlap, 91 S.W.2d 905, 908 (Tex. App. 1936) (The findings show fraud on [the part of the party seeking legal subrogation]. He does not come into court with clean hands, and is therefore not in a position to invoke the equitable principles upon which legal subrogation rests.);

    Christian v. Manning, 59 S.W.2d 234, 237 (Tex. App. 1933) (Applying to legal subrogation the maxim that “one who seeks equity must come into court with clean hands. and see: Bell v. Franklin, 230 S.W.2d 181, 185 (Tex. App. 1921) (same).);

    Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 245 (1933) (To aid a party in such a case would make this court the abetter of iniquity.’ Bein v. Heath, 6 How. 228, 247. And again: ‘A court of equity acts only when and as conscience commands; and, if the conduct of the plaintiff be offensive to the dictates of natural justice, then, whatever may be the rights he possesses, and whatever use he may make of them in a court of law, he will be held remediless in a court of equity.’ Deweese v. Reinhard, 165 U.S. 386, 390, 17 S.Ct. 340, 341.); http://laws.findlaw.com/us/290/240.html

    Pope Mfg. Co. v. Gormully, 144 U. S. 224, 236-237 (1892) (But whether this contract be absolutely void as contravening public policy or not, we are clearly of the opinion that it does not belong to that class of contracts the specific performance of which a court of equity can be called upon to enforce. To stay the arm of a court of equity from enforcing a contract, it is by no means necessary to prove that it is invalid; from time immemorial it has been the recognized duty of such courts to exercise a discretion, to refuse their aid in the enforcement of unconscionable, oppressive, or iniquitous contracts, and to turn the party claiming the benefit of such contract over to a court of law. This distinction was recognized by this Court in @ 30 U.S. 276, wherein Chief Justice Marshall says: “The difference between that degree of unfairness which will induce a court of equity to interfere actively by setting aside a contract and that which will induce a court to withhold its aid is well settled. 10 Ves. 292; 2 Coxe’s Cases in Chancery 77. It is said that the plaintiff must come into court with clean hands, [144 U. S. 237] and that a defendant may resist a bill for specific performance by showing that, under the circumstances, the plaintiff is not entitled to the relief he asks. Omission or mistake in the agreement, or that it is unconscientious or unreasonable, or that there has been concealment, misrepresentation, or any unfairness, are enumerated among the causes which will induce the court to refuse its aid.”); http://supreme.justia.com/us/144/224/case.html

    No man ought to derive any benefit of his own wrong {Commodum ex injuria sua non habere debet}; Vainly does he who offends against the law seek the help of the law {Frustra legis auxilium quærit qui in legem committit}; No one shall profit by his own wrong {Injuria propria non cadet in beneficium facientis}; No one acquires a right of action from his own wrong {Nemo ex proprio dolo consequitur actionem; Broom, Max. 3d Lond. Ed 270}; No one shall take advantage of his own wrong {Nullus commodum capere potest de injuriâ suâ propriâ}; No one shall take advantage of his own wrong {Nul prendra advantage de son tort demesne}; The thing speaks for itself {Res ipsa loquitur}; N.B. Fed.R.Civil P. 57 (Declaratory Judgments); 28 U.S.C. § 2201 (Creation of remedy); accord ORS 28.010 (Power of courts; form of declaration); ORS 28.020 (Declarations as to writings and laws); ORCP 52(B) [CCP 12/2/78; §A amended by CCP 12/13/80 and 12/14/96] (Absence of evidence); ORCP 54(B)(2) (Insufficiency of evidence); ORCP 62 (Finding of fact); ORCP 82(A)(1)(b) (Restraining orders; preliminary injunctions); ORS 40.115 Rule 307 (Allocation of the burden of producing evidence); and that class of authority, reason, custom and usage ad infinitum:

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