Federal Reserve Chair Janet Yellen announced Friday that the Federal Reserve is penalizing Wells Fargo by restraining the bank’s growth until it proves that its “governance and controls” have improved.
Wells Fargo also agreed to replace three board members by April and another before the end of 2018.
"We cannot tolerate pervasive and persistent misconduct at any bank, and the consumers harmed by Wells Fargo expect that robust and comprehensive reforms will be put in place to make certain that the abuses do not occur again," Yellen said. "The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers."
Last year, Wells Fargo released information showing employees created more than 3 million fictitious accounts in customers’ names to reach sales quotas, nearly a year after the company admitted that 2.1 million accounts were frauds. The accounts were opened with the consent of customers and they were charged for the unapproved services.
Additionally, thousands of Wells Fargo customers were charged for auto insurance products they didn't need, and veterans were discretely charged to refinance their mortgages. A $108 million settlement was paid by Wells Fargo over a lawsuit that accused the company of overchaging the veterans.
In response, Wells Fargo said in a statement they were "confident" they could meet the requirements put forth by the Federal Reserve.
Friday was Yellen's last day at the Federal Reserve and will be joining the Brookings Institution's Hutchins Center on Fiscal and Monetary Policy.