House report says Wells Fargo misled lawmakers about regulatory failures

Greg Nash

Wells Fargo senior leadership repeatedly failed to abide by legal settlements with federal regulators over a series of sales scandals and misled lawmakers about their compliance, according to a report from Democratic lawmakers released Wednesday night.

After a yearlong investigation into Wells Fargo, Democratic members of the House Financial Services Committee said the bank neglected to boost oversight of its operations and prove to federal regulators it had taken sufficient steps to prevent further consumer abuses.

The report also faults those regulators — the Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB) — for failing to curb years of Wells Fargo’s oversight failures and management lapses.

“Wells Fargo has clearly demonstrated an unwillingness and inability to stop harming its customers, so this Committee is working overtime to make sure consumers are never subjected to the types of abuses and failures committed by this megabank again,” said Rep. Maxine Waters (D-Calif.), chairwoman of the Financial Services panel, in a statement.

Republican members of the committee are also set to release their own report on Wells Fargo’s conduct, according to an executive summary shared with The Hill.

The GOP members also said Wells Fargo and its former chief executive, Timothy Sloan, “undermined the company’s efforts to comply with the terms of the consent orders by failing to create a culture of accountability, resisting recommendations from risk management experts, and focusing on the company’s growth and business reputation at the expense of regulatory compliance.”

Wells Fargo declined to comment on the report, which comes less than a week before the panel holds a series of hearings on the bank’s missteps. Wells Fargo chief executive Charles Scharf is scheduled to testify Tuesday, and board members Elizabeth Duke and James Quigley are set to appear Wednesday.

Wells Fargo also paid $3 billion on Feb. 21 to settle criminal and civil charges with the Justice Department and Securities and Exchange Commission related to the conduct outlined in the Democratic report.

Wells Fargo has operated under strict legal settlements with the Federal Reserve Board and OCC since 2018 over more than a decade of sales abuses. The bank has admitted charging customers fees on millions of accounts and products opened without their consent or with misleading tactics and failing to make promised adjustments to mortgages and auto loans that customers had on their homes and cars.

While Wells Fargo sought to assure lawmakers that the bank was taking seriously its mandate to overhaul internal controls, emails between bank leadership and federal regulators obtained by the Democratic lawmakers paint a different picture.

Officials at the Federal Reserve, CFPB and OCC repeatedly rejected Wells Fargo’s plans to compensate affected customers and comply with the regulators’ oversight demands, according to emails cited in the report. Regulators found Wells Fargo’s plans to be incomplete and insufficient to address to terms of the settlements, according to the report.

Even so, Sloan said in a March 12, 2019, hearing before the committee that the bank was “in compliance” with the OCC and Federal Reserve consent orders. Sloan’s claim prompted unprecedented rebukes from the OCC and Federal Reserve Chairman Jerome Powell, which led to Sloan’s retirement in June. 

Waters told reporters Thursday that she was considering referring Sloan to federal prosecutors for lying to Congress under oath, which is considered perjury.

Comptroller of the Currency Joseph Otting also said in a Thursday statement that “Wells Fargo Bank’s treatment of its customers and employees and its failure to promptly correct identified deficiencies under its previous management are unacceptable for this or any other bank.”

Otting added that “While the bank still has much work ahead, we are encouraged by the leadership and focus on regulatory matters by the bank’s new Chief Executive Officer.”

The committee also accused senior Wells Fargo leaders of showing a reluctance and “lack of urgency” over addressing the bank’s extensive regulatory issues. The report cites an April 2017 email exchange between Sloan and former chief risk officer Michael Loughlin in which Loughlin suggested leveraging a charity donation to escape regulatory scrutiny.

“If any of the $200MM [in proposed customer remediation] is left over, we promise to give it to charity—only after the CFPB and the OCC let us out of the consent orders. If they do not, no donation. Put the onus back on them,” Loughlin wrote. 

Loughlin agreed to pay a $1.25 million fine to the OCC in November over his role in Wells Fargo’s sales practices, but did not admit to or deny any misconduct.

Updated 12:08 p.m.

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