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From Banking and Finance Law Daily, September 30, 2016

Wells Fargo ordered to pay $24.1 million for SCRA violations

By John M. Pachkowski, J.D.

The Office of the Comptroller of the Currency and the Justice Department have undertaken a coordinated enforcement action against Wells Fargo Bank, N.A., for the bank’s violations of the Servicemembers Civil Relief Act (SCRA).

In its enforcement action, the OCC found that Wells Fargo violated three separate provisions of the SCRA over a 10-year period by failing to:

  1. provide the 6-percent interest rate limit to servicemember obligations or liabilities incurred before military service;
  2. accurately disclose servicemembers’ active duty status to the court via affidavits prior to evicting those servicemembers; and
  3. obtain court orders prior to repossessing servicemembers’ automobiles.

OCC penalties. As a result of these violations, Wells Fargo was ordered to pay a civil money penalty of $20 million, which reflected a number of factors, including the duration and frequency of violations, the financial harm to the servicemembers, deficiencies and weaknesses in the bank’s SCRA compliance program, and ineffective compliance risk management.

Compliance measures. Under a separate consent order with the OCC, Wells Fargo is also required to take a number of corrective measures to: ensure compliance with the SCRA; and provide restitution to servicemembers harmed by the bank’s SCRA violations.

DOJ settlement. The Justice Department entered into a consent order with Wells Fargo to settle allegations that the bank repossessed 413 cars owned by protected servicemembers without obtaining a court order over a seven-year period.

The consent order, which must be approved by a California federal court, calls for the bank to pay a penalty of $4.1 million to compensate servicemembers affected by the non-SCRA repossessions. The bank will also be required to provide these affected servicemembers any lost equity in the repossessed motor vehicle and interest accrued on this lost equity.

Finally, the consent order calls for Wells Fargo to establish procedures to ensure that it complies fully with all relevant provisions of the SCRA prohibiting the repossession of motor vehicles of SCRA-protected servicemembers without a court order; and develops SCRA Policies and Procedures for Motor Vehicle Repossessions in compliance with section 3952(a) of the SCRA.

Commenting on the Justice Department action, Principal Deputy Associate Attorney General Bill Baer noted that Wells Fargo "will now rightfully pay for its violations." Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division, stated, "I commend Wells Fargo for owning up to its shortcomings and providing all the information we requested after learning of our investigation." She added, "This settlement should help ensure that servicemembers are not penalized financially for protecting our nation."

Companies: Wells Fargo Bank, N.A.

MainStory: TopStory BankingOperations EnforcementActions Loans SCRA

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