Wells Fargo settled charges over its deceptive business practices for $37 million

Wells Fargo has agreed to pay $37 million to settle charges brought by six states, including Maryland, that the bank defrauded small and medium businesses that sold consumer credit cards to their customers through its …

Wells Fargo has agreed to pay $37 million to settle charges brought by six states, including Maryland, that the bank defrauded small and medium businesses that sold consumer credit cards to their customers through its merchant accounts unit.

Maryland regulators accused the San Francisco-based bank of misleading both customers and merchants, as it roped in new small business customers to buy credit card products that did not help them but brought in the bank’s own profits.

According to the complaint, the bank repeatedly estimated the quarterly revenue and expense totals of accounts that it set up with merchants, well above the bank’s own internal estimates. Additionally, once accounts were closed, the bank failed to inform customers that accounts were closed. The bank was also accused of failing to protect merchant information, sometimes posting incorrect monthly transactions on the accounts and sometimes erroneously reporting a merchant’s transaction volume to the credit reporting agencies and payment processors.

Maryland also accused the bank of failing to maintain accurate written policies and procedures for the authorization and notification of merchant transactions, and failing to provide merchants with accurate information on merchant account deposits.

“Makers of high-tech products are working in a complex global marketplace, and it is critical that banks be committed to ensuring fair and honest dealings with their clients,” Attorney General Brian Frosh said in a statement. “These allegations are a culmination of significant work that began in October of last year with our early implementation of a law requiring banks to clean up their act in this area.”

Maryland levied the settlement against Wells Fargo, Bank of America, Citigroup, U.S. Bank, PNC and Regions Bank, among others.

The state’s announcement comes just weeks after Wells Fargo reached a $142 million settlement with the Consumer Financial Protection Bureau and was the subject of the opening of a government investigation by Maryland’s Department of Financial Institutions.

The bank has also reached settlements with federal and state regulators related to opening millions of accounts in customers’ names without their permission in order to meet sales quotas.

That’s led to a swift overhaul of management at the bank, with CEO John Stumpf stepping down and the bank putting two new chief operating officers in charge of scandal-plagued consumer banking and business banking operations.

Maryland’s investigation was led by Ann Sands, deputy state attorney general and chief of the financial institutions division. The state relied on information from previous investigations in developing the case.

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