Risk & Compliance

House Report Says Wells Fargo Continues to ‘Abuse’ Customers

A new report slams the bank for failing to comply with regulatory orders on multiple customer abuse scandals and blasts regulators for inaction.
House Report Says Wells Fargo Continues to ‘Abuse’ Customers

Wells Fargo isn’t complying with the various financial settlements it agreed to over the last few years in the fake accounts scandal, the United States House Committee on Financial Services said in a report on Wednesday.

The report, released a week ahead of Wells Fargo CEO Charles Scharf’s testimony to Congress, concluded that the Wells Fargo board failed to oversee the management in addressing the risk management concerns raised by the regulators.

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The board didn’t ensure that there were managers with “sufficient compliance experience” to handle the matter, the report said, and instead outsourced the compliance to outside consultants.

The report further alleged that the board allowed management to “repeatedly” submit inadequate plans in response to the 2018 regulatory consent orders and that former Wells Fargo chief executive officer Timothy Sloan gave false statements to Congress in his March 2019 testimony.

Both the board and the management also “prioritized financials and other considerations” rather than working on fixing the issues identified by the regulators, it said.

“This Committee staff report shines a much-needed spotlight on ‘The Real Wells Fargo,’ a reckless megabank with an ineffective board and management that has exhibited an egregious pattern of consumer abuses,” Chairwoman Maxine Waters said in a statement.

“The Bank continues to engage in consumer abuses” per the House report, and “the potential for widespread consumer harm still remains.”

Wells Fargo agreed to pay about $7 billion in a settlement with regulators, including a recent $3 billion settlement made with the Justice Department and the Securities and Exchange Commission in the 2016 scandal where employees were found to be creating fake accounts in customers’ name under extreme sales pressure from the management.

The House Committee said that the regulators, too, failed to hold Wells Fargo accountable for the lack of compliance.

Financial regulators were aware of the problematic practices at Wells Fargo but didn’t take any public-enforcement action for years, according to the report.

The Consumer Financial Protection Bureau had “backchannel communications” with Wells Fargo regarding its compliance risk management consent order, the House Committee said.

The Office of the Comptroller of the Currency also failed to take effective actions to get Wells Fargo to “correct its weak controls over [unfair and deceptive acts or practices] risks” in the aftermath of the 2018 consent order.

This story originally appeared on Benzinga.

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