Wells Fargo Gets Fresh Sanction Under Scharf With OCC’s Fine
(Bloomberg) -- Wells Fargo & Co. was handed a fresh regulatory action and a $250 million fine over its lack of progress addressing long-standing problems, the first such sanction under Chief Executive Officer Charlie Scharf.
The penalty adds to the more than $5 billion in fines and legal settlements that the firm has paid over the last five years tied to a series of scandals that began with fake accounts in its branch network. The latest order, from the Office of the Comptroller of the Currency, cites deficiencies in Wells Fargo’s home-lending loss mitigation practices -- the steps firms take to avoid foreclosure -- that have prevented the bank from being able to “fully and timely remediate harmed customers.”
“Wells Fargo has not met the requirements of the OCC’s 2018 action against the bank,” Michael Hsu, the regulator’s acting chief, said in a statement Thursday. “This is unacceptable.”
In addition to the penalty, Hsu said the OCC is putting limits on the bank’s future activities until it fixes problems tied to its mortgage-servicing business. The regulator ordered the bank not to acquire certain third-party residential mortgage-servicing rights and to ensure borrowers aren’t transferred out of its loan-servicing portfolio until remediation is provided.
The regulator had warned the company it may bring new sanctions tied to the company’s pace in fulfilling its obligations, privately signaling it’s still not satisfied with the bank’s progress in compensating victims and shoring up controls, Bloomberg News reported last month. The bank, which signed so-called consent orders with the OCC and the Consumer Financial Protection Bureau three years ago, had sought more time to get the work done, according to people with knowledge of the situation.
The company’s scandals erupted in 2016 with the revelation that employees opened millions of fake accounts to meet sales goals. Problems emerged across other major business lines, leading to additional sanctions from regulators including a costly asset cap from the Federal Reserve.
In 2018, the OCC and the CFPB imposed $1 billion in fines and spotlighted issues in mortgage and auto lending in wide-ranging orders requiring the bank to fix its systems and make harmed customers whole. Wells Fargo disclosed that year that it found a calculation error in its mortgage-modification tool that led the firm to carry out hundreds of improper foreclosures.
The scandals led to leadership shakeups including the resignations of two CEOs, spurring a six-month search for an outsider to do the job. Scharf, who took over almost two years ago, has called satisfying U.S. regulators’ demands his highest priority.
“Our work to build the right foundation for a company of our size and complexity will not follow a straight line,” Scharf said in a statement Thursday. “We are managing multiple issues concurrently, and progress will come alongside setbacks. That said, we believe we’re making significant progress, the work required is clear and I remain confident in our ability to complete it.”
Shares of Wells Fargo rose 1.6% to $45.09 at 9:05 a.m. in early New York trading. The stock has gained 47% this year.
There have been signs of progress under Scharf, including the expiration this week of a 2016 CFPB order tied to the firm’s sales practices. In January, the Wells Fargo was freed from a 2015 regulatory order over violations of anti-money-laundering rules. And Bloomberg reported earlier this year that the Fed confidentially accepted a plan for overhauling risk management and governance -- the bank’s most meaningful progress yet in addressing the lapses that prompted the asset cap.
“Sometimes -- as is the case today -- we will reach a positive milestone on one set of issues while also being reminded that we need to redouble our focus on another,” Scharf wrote in an internal memo Thursday that was reviewed by Bloomberg. “When that happens, we should not lose sight of the progress we have made.”
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