Wells Fargo exits consent order. Is more regulatory progress coming?

Angus Mordant/Bloomberg

Wells Fargo has taken another step toward freedom from the slew of regulatory shackles that have hampered its growth for years.

The San Francisco-based bank said Tuesday that a consent order with the Consumer Financial Protection Bureau from 2022 had been terminated — a signal that analysts say could mean Wells is on its way out of asset-cap purgatory.

Wells has resolved seven regulatory consent orders since 2019. Seven more remain outstanding, plus an agreement with the Office of the Comptroller of the Currency from last September and a lawsuit filed by the CFPB in December that lists Wells as a defendant.

The CFPB said Tuesday that it's monitoring Wells despite the termination of the latest order.

"Wells Fargo is a repeat offender that continues to have serious issues," a CFPB spokesperson said in an email. "While the duration of an individual CFPB order elapsed, the agency's Repeat Offender Unit is continuing to closely scrutinize the bank."

But CFPB Director Rohit Chopra's days in the job may be numbered. The CFPB's focus on repeat offenders started during Chopra's tenure, and a new director, appointed by President Trump, could shift the agency's priorities.

The CFPB said in 2022 that the bank had violated laws related to auto loans and mortgages, alleging that Wells illegally assessed fees on loans and unlawfully repossessed vehicles, among other violations. The bureau hit the bank with a $1.7 billion fine, plus a $2 billion charge for consumer redress, covering more than 16 million affected consumer accounts.

Isaac Boltansky, director of policy research at BTIG, said in an interview that the movement on Tuesday shows Wells' progress in summiting its Mount Everest of regulatory burdens: the $1.9 trillion asset cap imposed by the Federal Reserve in 2018.

The journey to getting past the growth limit has been relatively opaque, but the closing of consent orders has been one of the few windows into the bank's headway, Boltansky said.

"We're not looking for all the consent orders to be resolved," he said. "I don't think there's any world in which all the consent orders are resolved. That's just the reality of being a global bank. … For me, it's directionally indicative of the improvements that they've made so far, and it reinforces my optimism that they'll be able to exit the asset cap over the next year or so."

Wells declined to comment beyond its press release.

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Gerard Cassidy, an analyst at RBC Capital Markets, wrote in a note that he expects the asset cap to be lifted in 2025, "possibly in the first half of the year."

"We view this news as a positive for Wells Fargo as it demonstrates progress of working with the company's regulators," he said in the note.

Wells CEO Charlie Scharf was brought on in 2019 to get the back on the right side of regulators. Last February, when the company exited an 8-year-old consent order with the OCC, Scharf said in a prepared statement that remediating legacy issues was the top priority.

He said at the time, though, that Wells still had "a significant amount of work ahead."

Boltansky said he's seen the tone of the bank shift under Scharf to fix the "frankly, many issues they had to remediate."

Now, Boltansky said the bigger picture is for regulators to show what it takes to come out the other side of an asset cap, which was a novel enforcement mechanism when it was first slapped onto Wells seven years ago. (The OCC hit TD Bank's U.S. operations with an asset cap for anti-money-laundering failures in October.)

"Regulators need to show that there is a means of exiting the asset cap for it to be a verifiable and operational tool — that it's not the Hotel California," Boltansky said. "It's a remediation tool, and I think that that is going to be proven out with Wells Fargo."