Federal regulators are poised to impose a $1 billion fine on Wells Fargo for years of selling unnecessary products to customers, the toughest action by the Trump administration against a major bank.
The penalty, part of an expected settlement on Friday between the bank and two regulators, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, will punish Wells Fargo for forcing customers to buy auto insurance policies they did not need and other misdeeds, according to four people briefed on the regulatory action.
It is the latest blow to Wells Fargo. For years, it was regarded as one of the country’s best-run banks but lately has been reeling from a string of self-inflicted crises.
President Trump has been especially vocal about holding Wells to account, taking to Twitter last year to warn that the bank could face stiff penalties. But he has been equally adamant about dismantling banking rules, part of a broader regulatory rollback.
The consumer bureau is carrying out both agendas. The agency’s interim director, Mick Mulvaney, has pushed aggressively for the penalty against Wells. The consumer bureau’s portion of the penalty is likely to represent the largest fine in its history.
Mr. Mulvaney is simultaneously working to defang the consumer bureau, an agency that has been a thorn in the side of the financial industry. He has criticized the bureau for wasteful spending and overzealous oversight.
Those dueling priorities — neutering the agency while fulfilling Mr. Trump’s promise to come down hard on Wells Fargo — have created friction.
Mr. Mulvaney, who also is director of the White House’s Office of Management and Budget, has spent the past several months doing everything he can to weaken the agency. He requested $0 for the agency’s quarterly budget.
“The bureau is far too powerful, and with precious little oversight of its activities,” he wrote in a message to Congress this month.
But at the same time, according to several administration officials, Mr. Mulvaney has been eager to ensure that the bureau fulfilled the president’s commitment to go after Wells Fargo. In conversations with colleagues in the Trump administration, Mr. Mulvaney has emphasized his role in orchestrating the $1 billion fine.
Last week, after Reuters reported the possibility of the $1 billion penalty, Mr. Mulvaney accused his staff at the consumer bureau of leaking “confidential” details about the settlement talks. Just hours after testifying before Congress, Mr. Mulvaney sent a memo to staff saying he had instructed the bureau’s inspector general to look into leaks by employees.
“I am extraordinarily concerned that some of these leaks might have come from bureau employees,” he wrote. “I recognize that there may well be some (a few? a lot?) of people who work here who aren’t happy that I’m working here. That’s fine. I also recognize that these folks might be interested in undermining my leadership here, or in quite simply looking to make me look bad.”
The penalty against Wells Fargo is likely to help insulate Mr. Mulvaney and the Trump administration against charges from Democrats and consumer groups that they are giving a pass to big banks. But aside from the expected Wells Fargo settlement, the consumer bureau — like other financial regulators in the Trump era — has been pursuing far fewer cases against banks than under the Obama administration.
That is largely by design. Administration officials including Mr. Mulvaney have repeatedly said that overly harsh regulation has left the banking industry with less capacity to make loans to American businesses and to otherwise support a growing United States economy.
The evidence for such claims is scant. At the end of last year, federally insured banks had $9.7 trillion of loans outstanding — at or near their historical high point — even as most of the regulations erected under President Barack Obama remain intact, according to data from the Federal Deposit Insurance Corporation.
And the industry is extraordinarily profitable. Wells Fargo, for example, said last week that it earned $5.9 billion in the first three months of the year. Other big banks reported similarly booming results — a far cry from an industry ravaged by overbearing regulators.
Wells Fargo is one of the country’s largest lenders, with branches and mortgage lending operations stretching from coast to coast. Until recently, Wells was the envy of the banking industry, with a reputation for steadily churning out profits while avoiding the reckless lending and investments that felled many of its rivals during the financial crisis.
That reputation has been obliterated by recent scandals. The trouble started in September 2016, when the consumer bureau revealed that the bank had been opening accounts and new credit cards in its customers’ names without telling them. The bank paid $185 million to settle that matter.
The fines kept coming. Since the beginning of 2016, state and federal regulators and the Justice Department have levied almost $1.5 billion in fines and penalties against the bank for offenses ranging from punishing whistle-blowers to unlawfully repossessing the cars of military service members.
In February, the Federal Reserve affixed extraordinarily tight handcuffs to Wells Fargo. The bank was barred from expanding until it cleaned up its internal financial and risk systems. The Fed also pushed for Wells to bring new blood on its board.
And Mr. Trump singled the bank out for criticism. “Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped,” the president wrote on Twitter. “I will cut Regs but make penalties severe when caught cheating!”
The settlement expected on Friday is likely to cite Wells Fargo’s practice of forcing auto insurance on some of its customers. It also is expected to blame the bank for improperly charging mortgage customers and for failing to maintain adequate risk management and compliance practices, according to one of the people briefed on the action.
The $1 billion settlement is likely to intensify pressure on Wells Fargo’s chief executive, Timothy J. Sloan. Mr. Sloan, a veteran of the bank, took over after his predecessor, John Stumpf, resigned after the eruption of the scandal involving Wells Fargo’s creation of fake accounts. A person briefed on the matter said that Mr. Sloan had no plans to leave the bank.
Experts cautioned against viewing the expected large penalty as a sign that the Trump administration or the consumer bureau are changing their attitudes toward oversight of the banking industry.
“The Wells activities are so egregious, they are unique,” said Lawrence J. White, a professor at New York University’s Stern School of Business. “I don’t think this tells us one way or the other about the future direction of the C.F.P.B.”
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