House Financial Services report faults regulators, Wells Fargo for poor response to consumer abuses; Otting replies

A staff report released Thursday by House Financial Service Committee Democrats citing deficiencies in federal regulators’ response to consumer abuses at Wells Fargo Bank drew a statement from the Comptroller of the Currency pledging the agency will “use every tool available” to ensure banks operate safely and soundly and “treat customers fairly.”

The committee staff report, the second by panel Democrats since 2017, when they were in the minority, suggests steps Congress should take – such as compelling regulators to act against “recidivist” banks – to beef up oversight and enforcement of consumer protections.

The report was released by committee Chairwoman Maxine Waters (D-Calif.) and Rep. Al Green (D-Texas), chairman of the committee’s oversight and investigations subcommittee, a week before the panels kick off a series of three hearings (March 10, 11, and 25) that focus on the roles of the bank’s top management and board in the bank’s activities and the question of accountability.

Thursday’s report focuses on Wells Fargo’s compliance with five regulatory orders issued in response to the company’s consumer abuses and compliance “breakdowns,” the panel said. It states that financial regulators knew for years about Wells Fargo’s deficiencies before taking enforcement action; says the bank and the Consumer Financial Protection Bureau’s (CFPB) political appointees “had backchannel communications” regarding the bureau’s compliance risk management consent order; faults the board’s lax oversight; and, among other things, said former Wells Fargo CEO Timothy J. Sloan gave inaccurate and misleading testimony during a March 2019 committee hearing.

The report also concludes that the potential for widespread consumer harm remains at Wells Fargo.

Waters, in Thursday’s release, called Wells Fargo “a reckless megabank with an ineffective board and management that has exhibited an egregious pattern of consumer abuses.” The report recommends five actions by Congress to strengthen big-bank oversight and enforcement:

  • Compel regulators to act against recidivist megabanks, like Wells Fargo, that engage in widespread consumer abuses;
  • Strengthen the regulators’ authorities and enhance bank management and board accountability;
  • Require greater transparency regarding bank supervision and how banks treat consumers;
  • Enhance bank compensation practices; and,
  • Pass a bank workers’ bill of rights.

In the OCC response Thursday, Otting said Wells Fargo Bank’s misdeeds under previous management “are unacceptable for this or any other bank.”

“OCC staff continues to work with the bank’s new management to correct the deficiencies identified in our previous orders and to comply with laws, regulations, and expectations going forward,” Otting’s statement reads. “I am confident in the OCC staff’s ability and resolve to use every tool available to ensure that banks we supervise operate in a safe and sound manner and, just as importantly, treat customers fairly. While the bank still has much work ahead, we are encouraged by the leadership and focus on regulatory matters by the bank’s new Chief Executive Officer.”

Wells Fargo leaders are scheduled to testify during the full committee’s March 10 and 11 hearings. No witness has been named for the March 25 hearing, which will be held by Green’s subcommittee

The Real Wells Fargo: Board & Management Failures, Consumer Abuses, and Ineffective Regulatory Oversight – report prepared by the majority staff of the House Financial Services Committee

Comptroller of the Currency Statement on the House Financial Services Committee’s Report on Wells Fargo