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CFPB may issue record fine against Wells Fargo over sales abuses

In the first penalty issued under the Trump administration, the Consumer Financial Protection Bureau is seeking a record penalty against Wells Fargo & Co. The fine, which could exceed hundreds of millions of dollars, is in regard to abuses in Wells Fargo's auto insurance and mortgage lending areas.

Working with Wells' main regulator, the Office of the Comptroller of Currency, the CFPB plans to sanction the banking giant for forcing some customers to buy unneeded auto insurance called "force-place" insurance -- and collected commissions on it.

Even more troubling, the force-place insurance was only required of drivers who financed through dealerships. Drivers who applied for financing directly through Wells Fargo were not required to buy the extra insurance. Additionally, Wells apparently waived the unneeded insurance for customers with high credit scores. These practices likely impacted minority applicants more severely than whites, and consumer protection lawyers have been arguing that the bank deserves an increased penalty for doing so.

Both the CFPB and OCC have also been investigating Wells Fargo for applying unlawful fees on mortgage borrowers.

In 2016, the CFBP levied a $100-million fine against Wells Fargo to settle the matter of phony and unauthorized accounts the megabank opened on behalf of unwitting borrowers. That had been the CFBP's largest-ever fine.

Although settlement terms have not been released, three people with knowledge of the agencies' discussions told Reuters that the CFBP is pushing for a penalty as high as $1 billion.

The Trump administration's pick, Mick Mulvaney, has been a controversial head of the CFPB. In December, Reuters reported that Mulvaney had shelved an enforcement action against Wells Fargo for its mortgage lending abuse. However, President Trump later pledged tough sanctions against the bank, which has faced numerous scandals over the past couple of years.

Mulvaney was a critic of the CFBP before being nominated to head it. Now he says that the agency had sometimes gone too far in the past, but that consumer abuses are a real problem.

"I think you're being naïve if you think there aren't folks out there who are breaking consumer financial protection laws," he commented last month.

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