Today is a good news, bad news day for Wells Fargo (NYSE:WFC) investors. Sure, WFC stock is trading higher because the banking giant settled a legal dispute with with the Consumer Financial Protection Bureau (CFPB). However, Wells Fargo has to pay a hefty sum — and it might pay more, as the litigation isn’t necessarily over yet.
According to BusinessWire, Wells Fargo just settled a lawsuit brought by the CFPB over “multiple matters […] related to automobile lending, consumer deposit accounts, and mortgage lending.” Bloomberg put it more bluntly, reporting that Wells Fargo had been accused of “allegations that for years it mistreated millions of customers, causing some to lose their cars or homes.”
To settle this, Wells Fargo agreed to pay $3.7 billion, which Bloomberg called a “record-setting amount.” Surely this means the bank’s troubles are in the rearview mirror, right?
Not necessarily. Apparently, CFPB Director Rohit Chopra “vowed that his agency might put further limitations” on Wells Fargo. It’s not clear exactly what this might entail, but it’s something WFC stock stakeholders should watch for in 2023.
What’s Happening With WFC Stock?
As of this writing, WFC stock is up nearly 1% compared to yesterday’s closing price. This suggests traders are relieved that the bank settled its lawsuit with the CFPB.
Perhaps they’re celebrating too early, though. Chopra might be on the war path next year. Further, Bloomberg paraphrased a warning from Wells Fargo itself that the bank “will have to set aside billions more in the fourth quarter to cover not only Tuesday’s settlement but other litigation as well.”
It’s not unreasonable for investors to be concerned about possible further financial consequences for Wells Fargo. Plus, there may be reputational damage to consider.
The BusinessWire report says “[c]urrent leadership has made significant progress to transform Wells Fargo.” Will this transformation help Wells Fargo free itself from further legal troubles in the coming year? WFC stock investors will have to wait and see — and hope for the best.
On the date of publication, David Moadel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
