NEW YORK (AP) — The Biden administration eased some of the restrictions on banking giant Wells Fargo, saying the bank has sufficiently fixed its toxic culture after years of scandals.
The news sent Wells Fargo’s stock up sharply Thursday as investors speculated that the bank, which has been kept under a tight leash by regulators for years, may be able to rebuild its reputation and start growing again. The bank’s shares closed up 7.2% to $52.04, its highest level since March 2022, in extremely active trading.
The Office of the Comptroller of the Currency, the regulator of big national banks like Wells Fargo, on Thursday terminated a consent order that had been in place since September 2016. The order required the bank to overhaul how it sold financial products to customers and provide additional consumer protections, as well as employee protections for whistleblowers.
That consent order was put into place after a series of newspaper and government investigations in 2016 found Wells Fargo to have a poisonous sales culture that pressured employees into selling multiple products to customers even though the products were not needed. Employees — who worked at “stores” not bank branches — were forced to open millions of unauthorized accounts. Customers had their identities stolen and their credit scores impacted. Of the millions of customers effected, a disproportionate number were non-English speaking Americans.
The scandal severely tarnished the reputation of San Francisco-based Wells Fargo, which eight years ago was considered one of the best-run banks in the country by investors and analysts.
Since the scandal broke, Wells Fargo overhauled its board of directors and management, paid more than a billion dollars in fines and penalties, and has spent eight years trying to show the public that the bad practices are a thing of the past. The scandal led to unionization efforts at some branches as employees protested how managers pushed unreasonable sales goals.
In a brief statement Thursday, the Comptroller of the Currency said that Wells Fargo’s “safety and soundness” and “compliance with laws and regulations does not require the continued existence of the Order.”
The decision is a major victory for Wells Fargo’s management and Charles Scharf, who took over as CEO in 2019.
“Confirmation from the OCC that we have effectively implemented what was required is a result of the hard work of so many of our employees, and I’d like to thank everyone at Wells Fargo involved for their dedication to transforming how we do business,” Scharf said in a prepared statement.
Citigroup banking analyst Keith Horwitz said in a note that the OCC’s decision was “positive proof” that Wells Fargo’s management was making the right decisions to fix the company’s culture.
There remains in place a Federal Reserve consent order against Wells Fargo as well as a requirement by the Fed that bank grow no bigger than its current size until it fixes its sales culture. The Fed declined to comment, but the OCC’s decision is likely to pressure the Fed to make its own decision regarding its restrictions on Wells Fargo.
Including the Fed’s order, Wells Fargo still has eight consent orders that govern its operations. That’s down from 14 when Scharf took over the bank. Management says they still have work to do.
“We’ve changed the company across a number of dimensions,” said Scott Powell, Well Fargo’s chief operating officer, in an interview. Powell joined the bank roughly around the same time as Scharf.
We’re doing better for customers and employees and we keep working to address the risk issues that are still outstanding.”
FAQs
US Eases Restrictions on Wells Fargo After Years of Strict Oversight Following Scandal. Feb. 15, 2024, at 1:21 p.m. NEW YORK (AP) — The Biden administration eased some of the restrictions on banking giant Wells Fargo, saying the bank has sufficiently fixed its toxic culture after years of scandals.
How Wells Fargo could have avoided a scandal? ›
A decision-making process informed by input from line employees, while not foolproof, would likely have avoided the far-reaching negative effects of the 2016 scandal. Illegal/Criminal Acts vs. Negligence, Lack of Information Sharing, Poor Decision-Making, etc.
Why is Wells Fargo getting sued again? ›
The complaint alleges that Wells violated the California's Homeowners Bill of Rights because the bank had "an obligation to ensure that competent and reliable evidence, including the borrower's loan status and information, supported its right to foreclose."
Which agency provides regulatory oversight for Wells Fargo? ›
The OCC charters, regulates, and supervises all national banks and federal savings associations as well as federal branches and agencies of foreign banks. The OCC is an independent bureau of the U.S. Department of the Treasury.
What stakeholders were affected by the Wells Fargo scandal? ›
Edward Friedman, Friedman states that stakeholder is anyone who can be affected by the business or can affect the business (Friedman 38). A great deal stakeholders were affected by the Wells Fargo crisis including Board of Directors, stockholders, employees, and the customers.
How did Wells Fargo overcome the scandal? ›
Since the scandal broke, Wells Fargo overhauled its board of directors and management, paid more than a billion dollars in fines and penalties, and has spent eight years trying to show the public that the bad practices are a thing of the past.
What was the outcome of the Wells Fargo scandal? ›
The scandal has led to billions of dollars of fines, the toppling of two chief executives, a guilty plea by a former retail banking chief to an obstruction charge, and a Federal Reserve cap on assets that remains in place.
Why is Wells Fargo bad? ›
The CFPB's specific findings include that Wells Fargo: Unlawfully repossessed vehicles and bungled borrower accounts: Wells Fargo had systematic failures in its servicing of automobile loans that resulted in $1.3 billion in harm across more than 11 million accounts.
What is Wells Fargo in trouble for? ›
December 2022The Consumer Financial Protection Bureau ordered Wells Fargo to pay $2 billion in refunds to over 16 million customers—as well as $1.7 billion in penalties—for charging illegal fees and interest on auto and mortgage loans, incorrectly repossessing customers' cars, mismanaging auto and mortgage loan ...
What is the bad news about Wells Fargo? ›
Wells Fargo ordered to pay $3.7 billion for 'illegal activity' including unjust foreclosures and vehicle repossessions. Federal regulators fined Wells Fargo a record $1.7 billion on Tuesday for “widespread mismanagement” over multiple years that harmed over 16 million consumer accounts.
Wells Fargo's stock (WFC) is up 12% this year, outperforming all big bank rivals and within sight of an all-time high. One big reason: Investors believe the San Francisco lending giant is slowly starting to shed some of the problems of its past.
Is Wells Fargo regulated by the government? ›
Overview of Regulation
The Federal Reserve has authority over the bank holding company. The Bureau of Consumer Financial Protection (CFPB) regulates and supervises Wells Fargo for consumer protection compliance.
Did anyone go to jail for the Wells Fargo scandal? ›
Tolstedt is also the rare top executive at a major U.S. bank to have faced potential time behind bars. None went to prison as a result of the 2008 global financial crisis. Prosecutors had sought a one-year prison term.
How much money did Wells Fargo steal? ›
Wells Fargo to pay $3.7 billion settling charges it wrongfully seized homes and cars The case marks the largest penalty ever imposed by the federal watchdog agency the Consumer Financial Protection Bureau. Customers who were harmed will receive $2 billion in restitution.
How much business did Wells Fargo lose after scandal? ›
Following Wells Fargo's $3 billion penalty over a financial scandal, the bank reported a 50% loss in profit for the fourth quarter. News of the profit drop affected Wells Fargo's remarket stock, which fell by 4% Friday morning. The bank's quarterly earnings report indicated a 67-cent per-share profit for Dec.
What could Wells Fargo have done differently to avert this cultural meltdown? ›
If frequent conversations existed within Wells Fargo, it would have allowed managers to provide feedback to their employees and adjust expectations as they saw fit.
How can Wells Fargo going forward prevent unethical subcultures from damaging its brand and reputation? ›
To prevent unethical subcultures from damaging its brand and reputation going forward, Wells Fargo should implement stronger ethical standards and codes of conduct, provide comprehensive training on ethical behavior, foster a culture of openness and transparency, and establish robust mechanisms for reporting and ...
How was Wells Fargo punished for their unethical behavior? ›
Wells Fargo paid $185 million in fines and penalties in 2016. Since then, the bank has admitted to or been caught engaging in more fraudulent or unethical activity. March 2017: The bank reaches a $110 million settlement to compensate affected customers in its fake accounts scandal.
What should business leaders take away from the Wells Fargo scandal? ›
Employees in Well Fargo were pressured to make sales, and this led to the creation of fake accounts. Leaders should focus on of setting goals that are achievable and will not encourage unethical methods of making sales. Also, leaders should apply ethical considerations in business.
