| Happy Friday and welcome back to Overnight Finance, redaction-free since 2015. I'm Sylvan Lane, and here's your nightly guide to everything affecting your bills, bank account and bottom line. See something I missed? Let me know at slane@thehill.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N. THE BIG DEAL: Wells Fargo will pay a $1 billion fine to settle charges the bank charged mortgage borrowers inappropriate fees and forced loan customers to purchase unnecessary auto insurance, two federal agencies announced Friday. The Consumer Financial Protection Bureau (CFPB) announced the settlement in partnership with the Office of the Comptroller of the Currency (OCC), both of which had been investigating Wells Fargo. "I am especially pleased that we were able to work closely and effectively with our colleagues at the OCC, and I appreciate the key role they played in the negotiations," said acting CFPB Director Mick Mulvaney. "As to the terms of the settlement: we have said all along that we will enforce the law. That is what we did here." Wells Fargo will pay a $1 billion fine, which will be deposited at the U.S. Treasury. It is also being ordered to reimburse roughly 50,000 affected customers up to $10 million. The bank must also create a committee to ensure compliance with the order and detail extensive plans to avoid similar abuses in the future. I've got more on the action here. What happened: Wells Fargo unfairly charged mortgage borrowers fees to lock in interest rates over delays that the customers did not cause. Banks will let mortgage borrowers lock in interest rates by paying a fee to hedge against rising rates later on in the agreement. Wells Fargo would charge customers a fee to extend the period during which they could cement the interest rate if the loan did not close before a certain time frame. Wells Fargo policy was to absorb fees to extend the interest rate lock period when the delay was not caused by the customer. But ProPublica reported in January 2017 that Wells Fargo had charged customers for fees that should have been covered by the bank. The CFPB found that Wells Fargo employees were aware of flaws in their interest-rate lock policies, and highlighted a October 2016 internal audit revealing that Wells Fargo had "inconsistently applied its policy and charged borrowers Extension Fees in situations where [Wells Fargo] was responsible for the delay in the loan's closing." The CFPB also said Wells Fargo "caused hundreds of thousands of consumers to be charged substantial premiums" for unnecessary or duplicative auto insurance. The bank had forced borrowers who used autos to secure loans to purchase insurance for the vehicle being used as collateral. Wells Fargo had forced roughly 2 million borrowers to purchase insurance for autos used as collateral, including hundreds of thousands who already had insurance policies for those vehicles, according to the CFPB complaint. Why it matters: The fine is one of the largest penalties slapped on a single bank, and it addresses actions that could have affected up to 1 million customers. The CFPB ordered Wells Fargo to reimburse roughly 50,000 confirmed victims up to $10 million, and revealed that close to 27,000 customers might have had vehicles used as collateral repossessed because of Wells Fargo's insurance scheme. The action against Wells Fargo is also the largest fine levied against a bank under President Trump, who said in December that the bank should face severe penalties. The bank has been fined a total of roughly $1.2 billion since 2016, and is under strict growth restrictions from the Federal Reserve, which has targeted four Wells Fargo boardmembers for removal. Lawmakers united against Wells Fargo: Former Wells Fargo CEO John Stumpf resigned in 2016, and his replacement, Tim Sloan, has vowed to right to ship. But lawmakers from both parties are calling for heads to roll. House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and the panel's ranking Democrat, Rep. Maxine Waters (Calif.), said Wells Fargo executives should be held accountable for fraudulent sales practices spanning several years. "It is not enough to hold a bank accountable," Hensarling said in a statement. "The actual individuals responsible for the wrongful deeds must be held responsible as well." Waters said "fines are not sufficient in addressing the pattern of illegal behavior by Wells Fargo, and this action still does not put the bank's past behavior to rest. Steeper penalties are still necessary." Reactions: - "It was the right thing to do. The Bureau of Consumer Financial Protection enforces the consumer financial protection laws. We had believed that Wells Fargo had broken those laws, and this part of the normal course of action for our business." -- Acting CFPB Director Mick Mulvaney.
- "Fraud is fraud and theft is theft. What happened to far too many customers at Wells Fargo for far too many years cannot be described any other way." -- House Financial Services Committee Chairman Jeb Hensarling (R-Texas).
- "To suggest this is the work of Mulvaney, who has done nothing but throw sticks in the spokes of a talented, hard-working CFPB team of devoted public servants is preposterous." -- Former CFPB Director Richard Cordray (D), taking a shot at his successor.
- "The Bank's failure to implement and maintain a satisfactory compliance risk management program has caused the Bank to engage in reckless, unsafe or unsound practices and violations of law." -- The Office of the Comptroller of the Currency.
LEADING THE DAY
Banks cash in on new tax law: Six big banks saved at least $3.59 billion in taxes in the first quarter of 2018 following the enactment of the GOP's tax-cut law in December, The Associated Press estimated. The new tax law slashed the corporate tax rate from 35 percent to 21 percent, allowing the banks to pay less in taxes. Under the old tax code, the banks paid between 28 percent and 31 percent of their incomes in corporate taxes annually. But they paid less in the first quarter of this year, with Citigroup, the highest taxed, having a tax rate of 23.7 percent, the AP said. The banks estimated that for all of 2018, they will have tax rates of between 20 percent and 22 percent. The Hill's Naomi Jagoda breaks it down here. GOP committee chair blasts FDIC over scathing data security report: The chairman of the House Science, Space and Technology Committee blasted a federal agency with oversight of U.S. financial institutions after a watchdog investigation revealed "systemic issues" plaguing the agency's handling and disclosure of data breaches. Committee Chairman Lamar Smith (R-Texas) is accusing leaders of the Federal Deposit Insurance Corporation (FDIC) of orchestrating a plan to "withhold information from Congress" after the inspector general found that the agency did not accurately report breaches to Congress or respond to document requests in 2016. The FDIC, an independent agency that provides deposit insurance and supervises financial institutions for safety and consumer protection, has previously been cited for poor cybersecurity practices. The agency suffered over 50 security breaches in just two years, according to an inspector general report issued last October. The Hill's Morgan Chalfant tells us more. Someday my ship will come in: Several China-bound ships carrying U.S. sorghum exports have changed course since China's government announced a new tariff targeting the U.S. grain industry this week. Reuters reports that 20 ships carrying more than 1.2 million tons of U.S. sorghum are currently at sea, with at least five of them announcing new courses after China's government announced a new tariff on sorghum Tuesday morning. The grain on board the 20 ships is valued at more than $216 million, but China is now forcing grain handlers to pay a 178.6 percent tariff of the value of the shipments as a deposit upon arriving. ON TAP NEXT WEEK Monday: - The Securities and Exchange Commission holds a roundtable on market structure for thinly traded securities, 9:30 a.m.
- The Peterson Institute for International Economics hosts an event entitled, "Central Bank Independence Revisited," 11 a.m.
Tuesday: - The Heritage Foundation hosts an event entitled "The Myth of Independence: How Congress Governs the Federal Reserve," 10:30 a.m.
- Senate Finance Committee: Hearing on the early impacts of the new tax law, 2:30 p.m.
Wednesday: - House Ways and Means Committee: Hearing entitled "Jobs and Opportunity: Employer Perspectives on the Jobs Gap," 11:30 a.m.
- House Small Business Committee: Hearing entitled "American Infrastructure and the Small Business Perspective," 11:30 a.m.
- House Financial Services Committee: Hearing entitled "HUD's Role in Rental Assistance: An Oversight and Review of Legislative Proposals on Rent Reform," 2 p.m.
Thursday: - House Appropriations Committee: Hearing on the SEC's fiscal 2019 budget request with Chairman Jay Clayton, 9:30 a.m.
- House Education and the Workforce Committee: Hearing entitled "Worker-Management Relations: Examining the Need to Modernize Federal Labor Law," 9:30 a.m.
- House Financial Services Committee: Hearing entitled "Oversight of the SEC's Division of Corporation Finance," 10 a.m.
- House Energy and Commerce Committee: Hearing entitled "Perspectives on Reform of the CFIUS Review Process," 10:15 a.m.
NEXT WEEK'S NEWS, NOW - The House will work on a bill to reauthorize the Federal Aviation Administration, one of the last major acts Congress needs to pass before lawmakers flee Washington for the campaign trail. That means it's likely to be loaded up with a slew of other policy riders and program extensions that can't wait until Congress returns from summer recess. Expect this bill to dominate the House floor next week.
- The Senate Finance Committee will hold a hearing Tuesday on the impact of the 2017 tax cuts, a bill that tore the panel apart as it moved last year. The debate over the tax cuts sparked several heated partisan squabbles, and senators litigating its impact on the U.S. economy means more are likely ahead.
GOOD TO KNOW - The House is aiming to vote to repeal the controversial Consumer Financial Protection Bureau (CFPB) policy on auto-loan financing during the week of May 7.
- New York Governor Andrew Cuomo on Thursday ramped up pressure on banks and insurers to revisit whether their ties to the National Rifle Association and other gun rights groups harm their reputations and the public interest, according to Reuters.
- Many Federal Reserve policy makers believe the U.S. has achieved full employment, but White House officials aren't so sure, according to Bloomberg News.
- The Wall Street Journal editorial board says regulators have given in to the bank lobby's wish for more leverage.
ODDS AND ENDS - A former reporter for Forbes magazine claims that President Trump lied to him decades ago about his net worth to snatch a coveted spot on the Forbes 400 Richest list.
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