Dive Brief:

• House Financial Services Committee Chair Maxine Waters, D-CA, called on regulators to “escalate penalties” against Wells Fargo in light of the bank’s history of unlawful, abusive and discriminatory behavior, according to a letter published Tuesday.
• Waters addressed the letter to leaders of the Consumer Financial Protection Bureau (CFPB), Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corp. (FDIC), Federal Reserve and Department of Housing and Urban Development (HUD).
• Waters pointed to recent revelations that the bank refinanced significantly fewer mortgages for Black applicants than their White counterparts, and conducted sham interviews with women and nonwhite candidates for jobs that had already been filled. 

Dive Insight:

Waters is hardly the first lawmaker to seek change at the San Francisco-based bank. Sen. Sherrod Brown, D-OH, wrote the bank’s CEO, Charlie Scharf, last month, asking him to “once and for all address Wells Fargo’s governance, risk management, and hiring practices.”

Sen. Elizabeth Warren, D-MA, asked the Federal Reserve, in a letter last September to Chair Jerome Powell, to revoke Wells Fargo’s financial holding company license — a move that would require the bank to separate its core retail and lending activities from its financial markets divisions.

At the heart of Waters’ request are two narratives that touch on race: a March Bloomberg report that Wells Fargo approved significantly fewer refinancing applications for Black homeowners than Whites; and a May report from The New York Times that the bank conducted fake interviews with women and nonwhite candidates in an effort to improve diversity and inclusion data. 

“[C]ommitments to diversity, equity, and inclusion are not stunts to be taken advantage of by megabanks; diversity, equity, and inclusion encompass aspects of both moral and legal obligations that financial institutions hold,” Waters wrote Tuesday. “It is unacceptable that Wells Fargo would mislead applicants and the public.”

Wells, meanwhile, was far and away the largest bank mortgage provider to Black homeowners, but refinanced mortgages for 72% of White applicants and only 47% of their Black counterparts.

“Consumers and homeowners deserve to be treated with respect and it is their civil right under the Fair Housing Act and the Equal Credit Opportunity Act to access credit equally and fairly, regardless of the color of their skin,” Waters wrote Tuesday.

In addition to calling on the CFPB, OCC, FDIC, Fed and HUD to investigate and ramp up penalties against Wells Fargo, Waters said she would introduce legislation that would “improve oversight and governance of megabanks while ensuring repeat offenders like Wells Fargo can no longer abuse their customers or lie to the public.”

Wells’ string of scandals over the past several years dates to 2016, when it was revealed the bank opened millions of unauthorized deposit and credit card accounts for customers to meet demanding sales targets. 

The San Francisco-based bank reached settlements with the CFPB, OCC and the city of Los Angeles as a result of the scandal, which also prompted the Fed in 2018 to cap the bank’s assets at $1.95 trillion. That penalty has yet to be lifted. 

Powell announced last year the asset cap would remain in place until the bank addressed its “widespread and pervasive” issues.

Waters on Tuesday argued the bank “continues to display a troubling pattern of bad behavior” and “must face real consequences.”