The Federal Reserve has determined that Wells Fargo should pay US$85 million in civil penalties for leading potential creditworthy borrowers to more costly subprime mortgages, according to a report by The Business Journal.
However, Wells denied the allegations, which covered lending practices at Wells Fargo Financial between January 2004 and September 2008.
“The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo,” said John Stumpf, the bank’s Chairman and Chief Executive.
“Fair and responsible lending practices have been at the core of our culture, and they will continue to guide us as we work closely with the Federal Reserve to provide restitution to customers who may have been harmed.”
Wells said that before and during the investigation, it voluntarily provided reimbursement to 600 borrowers at Wells Fargo Financial in the form of cash refunds and reduced interest rates.
It added that the bank fired has sacked the individuals involved in the matter.
The US$85 million fine is the Fed’s largest assessed penalty in a consumer-protection enforcement action. It said that this was the first formal enforcement action to address the alleged steering of creditworthy borrowers eligible for less costly prime mortgage into high-cost subprime loans.
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