Wells Fargo freed from a pair of 13-year-old consent orders

Cooper Neill/Bloomberg

Wells Fargo was freed Tuesday from a pair of enforcement actions dating back to 2011, marking yet another step on the megabank's path toward resolving its longstanding regulatory troubles.

The Federal Reserve Board terminated the two 13-year-old enforcement actions one week after the Consumer Financial Protection Bureau released Wells from a 2022 consent order.

The Fed noted that its decision has no impact on its larger 2018 enforcement action against Wells, which remains in effect. That order capped the company's assets at $1.9 trillion following its phony-accounts scandal.

Some analysts expect the 2018 order to be lifted soon, given the progress Wells is making in satisfying various regulatory requirements. In a research note Tuesday, Gerard Cassidy of RBC Capital Markets reiterated his view that the asset cap could be lifted in 2025, possibly during the first half of the year.

Including the enforcement actions put to bed on Tuesday, Wells has now resolved nine consent orders since 2019, which leaves five such orders outstanding, a company spokesperson said.

That tally of remaining consent orders doesn't include two more recent run-ins with regulators: an agreement with the Office of the Comptroller of the Currency in September related to anti-money-laundering controls and a lawsuit filed by the CFPB in December that accuses Wells, Bank of America, JPMorgan Chase and Zelle of enabling widespread fraud.

Being freed from the 2011 orders "is another important sign that we continue to make clear, meaningful progress to resolve our historical matters," Wells Fargo CEO Charlie Scharf said in a press release. The resolutions are "another indication that our team is establishing the right processes and controls to meet our regulators' and our own expectations," he added.

Scharf, a former top executive at Visa, Bank of New York Mellon and JPMorgan Chase, was brought onboard in 2019 to help Wells get back in line with its regulators. The company has been dealing with enforcement actions for years, but Scharf and other executives say progress is being made.

Last year, Wells cleared a major hurdle when the OCC ended a 2016 consent order related to the company's sales practices.

In December, Scharf said the OCC's termination of that consent order was "an incredibly important statement about how objectively they're looking at us and our ability to complete the work and then how they're going to judge us."

Wells Fargo

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

Analysts say the termination of a 2022 consent order with the CFPB is a sign that the bank's days under an asset cap may be numbered. But the consumer bureau, still led by Director Rohit Chopra, says Wells is still being scrutinized as a repeat offender.

By Catherine Leffert

January 28

The enforcement actions lifted Tuesday related to deficiencies in internal controls related to Wells' mortgage lending practices. The first order, which included an $85 million civil money penalty, focused on mortgage lending practices at a onetime subsidiary called Wells Fargo Financial. Between 2004 and 2008 certain salespeople "altered or falsified" prospective borrowers' incomes in order to qualify those borrowers for loans, according to the Fed's order.

The salespeople were "expected to sell a minimum dollar amount of loans to avoid performance improvement plans" that could result in the loss of their jobs, and they were supposed to sell a minimum dollar amount of loans "to receive incentive compensation above their base salary," the consent order stated.

As a result of that order, Wells Fargo formed a new committee called the Team Member Misconduct Executive Committee to address employee misconduct. The group, which included high-level executives, eventually stopped meeting, and did so without first informing the Fed of its plans, a source told American Banker more than two years ago.

The Fed's second enforcement action against Wells in 2011 focused on "unsafe or unsound" practices in the bank's residential mortgage loan servicing and foreclosure processing system. The action was taken in conjunction with a cease-and-desist order by the OCC, which required the bank to make sweeping improvements.