Senator Elizabeth Warren is urging the Federal Reserve to break up Wells Fargo and revoke its financial holding company status, “to eliminate abusive and unlawful practices that have cost consumers hundreds of millions of dollars,” according to a letter she sent Chairman Jerome Powell.
In the letter, Warren said that while under Janet Yellen’s leadership, “the Fed placed Wells Fargo under an asset cap in 2018 due to its ‘widespread consumer abuses and other compliance breakdowns.’ In the more than three years since then, numerous additional revelations have surfaced about Wells Fargo’s continued unethical and anti-consumer conduct. These new revelations have once again made clear that continuing to allow this giant bank with a broken culture to conduct business in its current form poses substantial risks to consumers and the financial system.”
Warren lists numerous scandals the bank has been “immersed in,” and notes that most recently, as the COVID-19 pandemic raged, an investigation by her staff during the summer of 2020 revealed that Wells Fargo had placed as many as 1,600 customers into forbearance on their mortgages without their consent, potentially affecting their ability to refinance mortgages, their credit reports and consumer bankruptcy plans.
Last week, the Office of the Comptroller of the Currency issued a consent order regarding Wells Fargo Bank’s ongoing problems related to mortgage foreclosures and the bank’s failure to comply with past consent orders issued by the agency.
“The Bank’s inadequate controls, insufficient independent oversight, and ineffective governance related to loss mitigation activities have caused the Bank’s failure to timely detect, prevent, and quantify inaccurate loan modification decisions and impaired the Bank’s ability to fully and timely remediate harmed customers,” the order read. “In other words, Wells Fargo has both failed to establish an effective program to prevent customers from foreclosing on their homes and has been unable to compensate consumers harmed by the bank’s previous abusive practices,” Warren’s letter read.
In addition, the OCC gave the bank a $250 million fine “based on the bank’s unsafe or unsound practices related to deficiencies in its home lending loss mitigation program and violations of the 2018 Compliance Consent Order,” according to the OCC.
“Wells Fargo has not met the requirements of the OCC’s 2018 action against the bank. This is unacceptable,” Acting Comptroller of the Currency Michael J. Hsu said in a statement. “In addition to the $250 million civil money penalty that we are assessing against Wells Fargo, today’s action puts limits on the bank’s future activities until existing problems in mortgage servicing are adequately addressed. The OCC will continue to use all the tools at our disposal, including business restrictions, to ensure that national banks address problems in a timely manner, treat customers fairly, and operate in a safe and sound manner.”
Warren asked the Fed to act to protect consumers and the integrity of the banking and financial system and revoke Wells Fargo’s status as an financial holding company.
“The Fed should move quickly to require the company to ‘spin off or sell its investment bank and other nonbanking activities,’ and do so in a way that ensures customers can continue to have access to banking services without disruption or inconvenience,” she wrote.
Wells Fargo issued a statement, saying: “Serving customers with the highest standards requires a strong risk and control foundation. That’s why meeting our own expectations for risk management and controls — as well as our regulators’ — remains Wells Fargo’s top priority. We are a different bank today than we were five years ago because we’ve made significant progress.”
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