Wells Fargo & Company (US:WFC) and its subsidiary, Wells Fargo Bank, N.A., said Tuesday that it agreed to pay $3.7 billion to resolve potential criminal and civil liability for behavior from 2002 to 2016 in which they pressured employees to meet unrealistic sales goals, which led to employees creating false accounts or selling products under false pretenses, often by creating false records or misusing customers' identities.

Wells Fargo admitted that it collected millions of dollars in fees and interest to which it was not entitled, harmed the credit ratings of certain customers, and unlawfully misused customers' sensitive personal information, including their means of identification. The settlement includes a three year deferred prosecution agreement that compels Wells to abide by certain conditions, including continuing to cooperate with government investigations and implementing reforms. The settlement also requires Wells Fargo to pay a $500 million civil penalty to the SEC and to reform its business practices. 

"When companies cheat to compete, they harm customers and other competitors," Deputy Assistant Attorney General Michael D. Granston of the Department of Justice's Civil Division said. "This settlement holds Wells Fargo accountable for tolerating fraudulent conduct that is remarkable for its duration and scope and blatant disregard of customer's private information. The Civil Division will continue to use all available tools to protect the American public from fraud and abuse, including misconduct by or against their financial institutions." 

Wells Chief Executive Officer Charlie Scharf said that the settlement is a key step in the company's efforts to transform its operating practices and put these issues behind it. The company expects to incur operating losses of approximately $3.5 billion for the quarter ending Dec. 31, 2022, including costs related to the CFPB civil penalty and customer remediation. Wells Fargo's full fourth quarter financial results will be reported on Jan. 13, 2023. 

According to regulators, local branch managers were aware of the practices, including one employees called "gaming." The practice included using existing customers' identities without their consent to open accounts, consumer checking, savings and other accounts to generate sales and revenue.

Wells also created PINs to activate unauthorized debit cards, transferred money from customer accounts to unauthorized accounts (a practice known internally as "simulated funding"), opened credit cards and bill pay products without authorization, altered customers' contact information to prevent them from learning of unauthorized accounts and to prevent Wells Fargo employees from reaching out to conduct customer satisfaction surveys, and encouraging customers to open accounts they did not want or need.