Dive Brief:
- Wells Fargo could face additional sanctions from regulators over the pace at which it is complying with various consent orders issued in the wake of its 2016 fake-accounts scandal, Bloomberg reported Tuesday.
- The Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB) are not satisfied with the progress the San Francisco-based bank has made regarding restitution for victims of the scandal, sources told the wire service.
- The bank, which has already paid more than $5 billion in fines and legal settlements related to a series of consumer abuse scandals over the past five years, has asked regulators for more time to comply with the orders, according to sources.
Dive Insight:
Since taking over the scandal-plagued bank in 2019, Wells Fargo CEO Charlie Scharf signaled that getting on the right side of regulators is a top priority, and the bank has made some progress under his leadership.
Wells Fargo faced 12 enforcement actions when he took the helm in October 2019, and the bank has winnowed that to 10.
However, recent reports that regulators aren’t pleased with the progress the bank has made in compensating victims, falls on the shoulders of Scharf and the bank’s new management team.
The bank has made payments to the vast majority of its victims, encompassing millions of consumers, sources told Bloomberg. But the bank reportedly is facing challenges identifying affected customers and calculating the extent to which they were harmed.
Wells Fargo has been operating under a Federal Reserve-imposed cap since 2018, limiting the bank's assets to $1.95 trillion until it improved its governance and risk management controls.
Scharf in April called the bank’s efforts to improve its risks and controls, "a multiyear effort."
"[T]here is still much to do, but I am confident we are making progress, though it is not always a straight line," he told analysts during an earnings call. "We are steadfast in our commitment to do this work, which should ultimately satisfy our regulatory obligations."
Meanwhile, three former Wells Fargo executives, former Chief Auditor David Julian, former community banking executive Claudia Russ Anderson and former Executive Audit Director Paul McLinko, are gearing up for a trial this month in Sioux Falls, South Dakota, for their connection to the scandal, according to American Banker.
The trial, which is expected to start Sept. 13, will feature former Wells CEOs John Stumpf and Tim Sloan as witnesses, the publication reported. Examiners at the OCC are also expected to testify.
The OCC claims the three defendants failed to perform their duties adequately, leading to systemic problems at the bank, according to American Banker.
Defense lawyers for the former executives are calling the allegations unfounded and aim to focus attention on problems with the agency’s supervision of the bank, the publication reported.
