NEW YORK (CNN/Money) - Shares of Wells Fargo & Company fell nearly 4 percent Wednesday after California threatened to revoke the bank's residential mortgage lending license in the nation's biggest state.

Accusing the bank's mortgage unit of overcharging and not disclosing charges, Gov. Gray Davis' administration said the state Department of Corporations has issued notice of intent to revoke the bank's residential mortgage lending license.

A company spokesperson called the state's allegations of overcharging a "misrepresentation."

The administration, in a press release, said the notice was based on Wells Fargo's refusal to make refunds after an examination revealed improper charges and inadequate disclosure to California consumers.

The Department of Corrections, according to the press release, found two types of violations in its examination of Wells Fargo Home Mortgage: daily interest overcharges and a failure to fully disclose finance charges.

Shares of Well Fargo (WFC: Research, Estimates), based in San Francisco, fell $1.71, or 3.6 percent, to $45.32 Wednesday.

"The mortgage interest payments that we charge are fully legal under federal law," said Julia Tunis, a Well Fargo spokesman, who could not immediately say what's next in the dispute.

The state said the average understated finance charge was $613, while loan overcharges averaged $150.