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House Report Says Wells Fargo Continues To 'Abuse' Customers, Blasts Regulators For Inaction

Wells Fargo & Co. (NYSE: WFC) isn't complying with the various financial settlements it agreed to over the last few years in the fake accounts scandal, the United States House Committee on Financial Services said in a report on Wednesday.

Benzinga · 03/05/2020 12:10

Wells Fargo & Co. (NYSE: WFC) isn't complying with the various financial settlements it agreed to over the last few years in the fake accounts scandal, the United States House Committee on Financial Services said in a report on Wednesday.

Wells Fargo Undermining Regulators

The report released a week ahead of the Wells Fargo CEO Charles Scharf's testimony to the Congress concluded that Wells Fargo board failed to oversee the management in addressing the risk management concerns raised by the regulators.

The board didn't ensure that there were managers with "sufficient compliance experience" to handle the matter, the report said, and instead outsourced the compliance to outside consultants.

The report further alleged that the board allowed the management to "repeatedly" submit inadequate plans in response to the 2018 regulatory consent orders and that the former Wells Fargo chief executive officer Timothy Sloan gave false statements to the Congress in March 2019 testimony.

Both the board and the management also "prioritized financials and other considerations" rather than working on fixing the issues identified by the regulators, it said.

"This Committee staff report shines a much-needed spotlight on ‘The Real Wells Fargo,' a reckless megabank with an ineffective board and management that has exhibited an egregious pattern of consumer abuses," Chairwoman Maxine Waters said in a statement.

"The Bank continues to engage in consumer abuses" per the House report, and "the potential for widespread consumer harm still remains."

Wells Fargo has agreed to pay about $7 billion in settlement with regulators, including a recent $3 billion settlement made with the Justice Department and the Securities and Exchange Commission, in the 2016 scandal where employees were found to be creating fake accounts in customers' name under extreme sales pressure from the management.

Regulators Showed Inaction

The House Committee said that the regulators, too, failed to hold Wells Fargo accountable for the lack of compliance.

Financial regulators were aware of the problematic practices at Wells Fargo but didn't take any public-enforcement action for years, according to the report.

The Consumer Financial Protection Bureau had "backchannel communications" with Wells Fargo regarding its compliance risk management consent order, the House Committee said.

The Office of the Comptroller of the Currency also failed to take effective actions to get Wells Fargo to "correct its weak controls over [unfair and deceptive acts or practices] risks" in the aftermath of the 2018 consent order.