Wells Fargo & Co., the largest U.S. home lender and a major Minnesota employer, agreed to pay a record $85 million fine to settle Federal Reserve allegations it steered borrowers into costlier loans and falsified data in mortgage applications.
Employees at Des Moines, Iowa-based Wells Fargo Financial, the lender's consumer-finance unit, pushed customers who may have been eligible for prime interest rates into loans carrying higher rates intended for riskier borrowers, the Fed said in a statement announcing the settlement Wednesday.
Separately, sales personnel used false documents to make it appear borrowers qualified for loans when their incomes made them ineligible.
The company shuttered Wells Fargo Financial in July 2010, eliminating 3,800 jobs, and ceased making non-prime home loans. The business was overseen by Mark Oman, 56, who has announced he will retire by the end of the year. The San Francisco-based bank didn't admit wrongdoing in agreeing to the action.
The accord requires Wells Fargo to re-evaluate qualifications of borrowers who received a subprime, cash-out refinancing loan between January 2006 and June 2008. Wells Fargo must compensate borrowers harmed by the practice, which may exceed 10,000, according to the statement.
The Fed also issued consent orders against 16 Wells Fargo employees that bar them from working in the banking industry, the regulator said in the statement.
The civil penalty is the largest issued by the Fed in a consumer-protection action, according to the statement.