The action by the CFPB is notable because it is the first penalty imposed by the bureau under Mick Mulvaney, who US President Donald Trump appointed to take over the consumer watchdog agency in late November. 

The US$500 million is also the largest penalty imposed by the CFPB in its history, the previous being a US$100 million penalty also against Wells Fargo, and matches the largest fine ever handed out by the Office of the Comptroller of the Currency, which fined HSBC US$500 million in 2012.

The settlement also contains other requirements that would restrict Wells Fargo’s business. 

The bank will need to come with a risk management plan to be approved by bank regulators, and get approval from bank regulators before hiring senior employees.

The nation’s third-largest bank submitted to an unprecedented order Friday that would give the Office of the Comptroller of the Currency the right to remove some of the lender’s executives or board members.

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The OCC said it “reserves the right to take additional supervisory action, including imposing business restrictions and making changes to executive officers or members of the bank’s board of directors.” The agency could also veto potential executive candidates.

“While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency,” Wells Fargo Chief Executive Tim Sloan said in a statement.

The US$500 million paid to the Comptroller of the Currency will be paid directly to the US Treasury, according to the order. 

The US$500 million paid to the CFPB will go into the bureau’s civil penalties fund, which is used to help consumers who might have been affected in other cases. 

But zero dollars of either penalty is going directly to Wells Fargo’s victims.

The bank has already been reimbursing customers in its auto and mortgage businesses for those abuses. 

Wells Fargo has been refunding auto loan customers since July and been mailing refund checks to mortgage customers since December.

While banks have benefited from looser regulations and lower taxes under Trump, Wells Fargo has been called out specifically by the president as a bank that needed to be punished for its bad behaviour.

“Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!” Trump wrote on Twitter in December.

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The abuses being addressed Friday are not tied directly to Wells Fargo’s well-known sales practices scandal, where the bank admitted its employees opened as much as 3.5 million bank and credit card accounts without getting customers’ authorisation. 

But they do involve significant parts of the bank’s businesses: auto lending and mortgages.

Last summer, Wells Fargo admitted that hundreds of thousands of its auto loan customers had been sold auto insurance that they did not want or need. 

In thousands of cases, customers who could not afford the combined auto loan and extra insurance payment fell behind on their payments and had their cars repossessed.

In a separate case, Wells Fargo also admitted that thousands of customers had to pay unnecessary fees to lock in their interest rates on their home mortgages. 

Wells Fargo is the nation’s largest mortgage lender and has been under intense scrutiny by federal regulators for several months. 

The Federal Reserve took a historic action earlier this year by mandating that the bank could not grow larger than the US$1.95 trillion in assets that it held at the time and required it to replace several directors on its board. The Federal Reserve cited “widespread abuses” as its reason for taking such an action.

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This settlement does not involve Wells Fargo’s wealth management business, which is reportedly under investigation for improprieties similar to those that impacted its consumer bank. Nor does it involve an investigation into the bank’s currency trading business.

Consumer advocates have been critical of the Trump administration’s record since it took over the CFPB. However, advocates were pleased to see Wells Fargo held to account.

“Today’s billion dollar fine is an important development and a fitting penalty given the severity of Wells Fargo’s fraudulent and abusive practices,” said Pamela Banks, senior policy counsel for Consumers Union.

Contains additional reporting from Bloomberg