Wells Fargo agreed Friday to pay $575 million to resolve claims with prosecutors in all 50 states and Washington, D.C., related to millions of phony accounts as well as issues in its auto- and mortgage-lending businesses.
Along with the payments, the San Francisco-based lender agreed to field teams to answer questions regarding the issues, which have all been investigated by federal regulators, and to offer a website for consumers that explains the bank’s remediation efforts.
“This agreement underscores our serious commitment to making things right in regard to past issues as we work to build a better bank,” said Chief Executive Officer Tim Sloan, who was promoted to the role in 2016 after backlash over more than 3 million unauthorized accounts prompted his predecessor’s departure.
Earlier this year, the Federal Reserve ordered the bank not to expand its total assets beyond the nearly $2 trillion held at the end of 2017 until it resolves the regulator’s oversight concerns. Since then, the bank has agreed to pay $1 billion in civil penalties to settle government claims it sold some auto borrowers insurance they didn’t need under the pretense they might not qualify for their loans otherwise and charged fees to mortgage customers that it was supposed to be absorbing.
In August, Wells Fargo said it would pay $2.09 billion to settle Justice Department allegations that the bank packaged mortgages that were higher risk than they appeared into securities sold before the 2008 financial crisis. Bank officials were aware that the borrowers had misstated their incomes, the department said, which would impede their ability to repay the loans.
Amid the series of revelations, Sen. Elizabeth Warren, a Massachusetts Democrat, urged the Fed not to lift its growth cap until the bank’s board replaces Sloan, whose 30 years at the lender include a number of leadership positions, but Chairman Jay Powell sidestepped the request.
While characterizing the events at Wells Fargo as “outrageous,” Powell deferred to the central bank’s board of governors, which oversees its regulatory actions.
“Your letter requests the board not remove the asset growth restriction until the current chief executive officer of Wells Fargo” is replaced, he wrote at the end of a Nov. 28 letter obtained by the Washington Examiner. The missive outlined actions the Fed has taken so far, including its order barring the bank from expanding total assets beyond the nearly $2 trillion held at the end of last year.
“The decision about terminating the asset growth restriction will be made by a vote of the board,” he added. “The Federal Reserve is actively engaged in reviewing Wells Fargo’s progress in meeting the requirements of the order and in ensuring that the firm comprehensively address the deficiencies identified.”
Wells Fargo declined to comment on Powell’s letter at the time. Sloan has previously told Wells Fargo investors that his team is working closely with the Fed to address its regulatory issues while maintaining that the central bank’s action hasn’t hurt its day-to-day operations or hindered its strategic goals.
Wells Fargo climbed 1.5 percent to $46.23 in New York trading on Friday, paring its decline this year to 24 percent. The bank has already allocated $400 million of the settlement amount and expects to post the remaining amount to its books before the end of the year.
