By George Avalos
Contra Costa Times
Posted: 07/20/2011 08:21:45 PM PDT
Updated: 07/20/2011 08:21:50 PM PDT
Wells Fargo agreed to pay a record $85 million fine amid allegations that the bank steered customers into more costly loans and falsified information in mortgage applications.
San Francisco-based Wells Fargo didn’t admit wrongdoing in its settlement with the Federal Reserve.
The settlement also requires Wells Fargo to compensate affected borrowers. The number of people who may have been harmed could exceed 10,000.
“The $85 million civil money penalty is the largest the Federal Reserve Board has assessed in a consumer-protection enforcement action,” the Fed said in a prepared release.
“We are glad to see the federal government becoming more active on these sorts of things,” said Bruce Mirken, a spokesman for the Berkeley-based Greenlining Institute. “It’s encouraging that this sort of thing is getting attention.”
“The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo,” Wells Fargo CEO John Stumpf said in a prepared release.
The bank promised to work closely with the Fed in the ongoing efforts to remedy the alleged mistreatment of borrowers.
The alleged actions occurred at Wells Fargo Financial, a now-defunct unit of the bank.
Wells Fargo Financial sales personnel steered borrowers who were potentially eligible for prime interest rate loans into loans at higher, subprime interest rates, resulting in greater costs to borrowers, according to the allegations outlined by the Federal Reserve.
In addition, according to the allegations, Wells Fargo Financial employees falsified information about borrowers’ incomes. The purpose, the Fed alleged, was to make it appear that the borrowers qualified for loans when they would not have qualified based on their actual incomes.
Wells Fargo Financial was closed in July 2010, a move that erased 3,800 jobs at the bank. Wells also disclosed at the time that it had ceased making subprime loans.
The settlement covers some loans made from January 2004 to September 2008.
Less than 4 percent of the 300,000-plus mortgage loans that Wells Fargo originated during those 41/2 years are expected to be eligible for restitution under the terms of the settlement.