NEW YORK (AP) — The Biden administration eased some of the restrictions on banking giant Wells Fargo, saying the bank has sufficiently fixed its toxic culture after years of scandals.
The news sent Wells Fargo’s stock up sharply Thursday as investors speculated that the bank, which has been kept under a tight leash by regulators for years, may be able to rebuild its reputation and start growing again. The bank’s shares closed up 7.2% to $52.04, its highest level since March 2022, in extremely active trading.
The Office of the Comptroller of the Currency, the regulator of big national banks like Wells Fargo, on Thursday terminated a consent order that had been in place since September 2016. The order required the bank to overhaul how it sold financial products to customers and provide additional consumer protections, as well as employee protections for whistleblowers.
That consent order was put into place after a series of newspaper and government investigations in 2016 found Wells Fargo to have a poisonous sales culture that pressured employees into selling multiple products to customers even though the products were not needed. Employees — who worked at “stores” not bank branches — were forced to open millions of unauthorized accounts. Customers had their identities stolen and their credit scores impacted. Of the millions of customers effected, a disproportionate number were non-English speaking Americans.
The scandal severely tarnished the reputation of San Francisco-based Wells Fargo, which eight years ago was considered one of the best-run banks in the country by investors and analysts.
Since the scandal broke, Wells Fargo overhauled its board of directors and management, paid more than a billion dollars in fines and penalties, and has spent eight years trying to show the public that the bad practices are a thing of the past. The scandal led to unionization efforts at some branches as employees protested how managers pushed unreasonable sales goals.
In a brief statement Thursday, the Comptroller of the Currency said that Wells Fargo’s “safety and soundness” and “compliance with laws and regulations does not require the continued existence of the Order.”
The decision is a major victory for Wells Fargo’s management and Charles Scharf, who took over as CEO in 2019.
“Confirmation from the OCC that we have effectively implemented what was required is a result of the hard work of so many of our employees, and I’d like to thank everyone at Wells Fargo involved for their dedication to transforming how we do business,” Scharf said in a prepared statement.
Citigroup banking analyst Keith Horwitz said in a note that the OCC’s decision was “positive proof” that Wells Fargo’s management was making the right decisions to fix the company’s culture.
There remains in place a Federal Reserve consent order against Wells Fargo as well as a requirement by the Fed that bank grow no bigger than its current size until it fixes its sales culture. The Fed declined to comment, but the OCC’s decision is likely to pressure the Fed to make its own decision regarding its restrictions on Wells Fargo.
Including the Fed’s order, Wells Fargo still has eight consent orders that govern its operations. That’s down from 14 when Scharf took over the bank. Management says they still have work to do.
“We’ve changed the company across a number of dimensions,” said Scott Powell, Well Fargo’s chief operating officer, in an interview. Powell joined the bank roughly around the same time as Scharf.
We’re doing better for customers and employees and we keep working to address the risk issues that are still outstanding.”
FAQs
US Eases Restrictions on Wells Fargo After Years of Strict Oversight Following Scandal. Feb. 15, 2024, at 1:21 p.m. NEW YORK (AP) — The Biden administration eased some of the restrictions on banking giant Wells Fargo, saying the bank has sufficiently fixed its toxic culture after years of scandals.
What was the solution for the Wells Fargo scandal? ›
To address the scandal and prevent similar incidents in the future, Wells Fargo implemented a number of reforms and measures. These included strengthening its compliance and ethics programs, improving its customer service and communication practices, and increasing transparency and accountability within the company.
What did the organization do wrong under the circ*mstance Wells Fargo? ›
This misconduct was disclosed in 2016 when it became known that Wells Fargo employees had opened millions of unauthorized accounts in customers' names without their knowledge. This was fueled by a hyper- competitive sales culture, where the employees were under unrelenting pressure with unwavering targets.
How Wells Fargo could have avoided a scandal? ›
Employees at Wells Fargo—and the company as a whole—could have benefitted from frequently reviewing their own goals to ensure they kept up with the company's mission, since studies show that companies that allow employees to revise or review their goals every month are 50% more likely to score in the top quartile of ...
Has Wells Fargo ever been sued? ›
Two former Wells Fargo advisors are suing the firm for breach of contract, unfair business practices, and retaliation after they say they resisted pressure from their supervisors to secretly transfer sensitive client information from the advisor and brokerage side of the company to the private bank.
How did Wells Fargo change after the scandal? ›
Since the scandal broke, Wells Fargo overhauled its board of directors and management, paid more than a billion dollars in fines and penalties, and has spent eight years trying to show the public that the bad practices are a thing of the past.
What happened after the Wells Fargo scandal? ›
The scandal has led to billions of dollars of fines, the toppling of two chief executives, a guilty plea by a former retail banking chief to an obstruction charge, and a Federal Reserve cap on assets that remains in place.
What regulations did Wells Fargo violate? ›
According to the CFPB, Wells Fargo customers had their vehicles wrongly possessed, were illegally charged erroneous fees and interest charges on auto and home loans and were also charged “unlawful” overdraft fees. More than 16 million consumer accounts were affected, the agency says.
What happened at Wells Fargo with regard to pass activities that led to this major scandal? ›
Wells Fargo is “an American multinational financial services company headquartered in San Francisco, California” with offices nationwide and “the world's second-largest bank by market capitalization and the third largest bank in the U.S. by total assets.” In September 2016 it was discovered that the company was ...
What could Wells Fargo have done differently to avert this scandal and cultural meltdown? ›
If frequent conversations existed within Wells Fargo, it would have allowed managers to provide feedback to their employees and adjust expectations as they saw fit.
Tolstedt is also the rare top executive at a major U.S. bank to have faced potential time behind bars. None went to prison as a result of the 2008 global financial crisis.
What is the Wells Fargo Legal scandal? ›
February 2020Perhaps the company's most notorious scandal, Wells Fargo employees were caught creating millions of savings and checking accounts for customers without their knowledge or approval after being pushed by their superiors to cross-sell products and meet quotas, ultimately culminating in a $3 billion ...
Does Wells Fargo have a bad reputation? ›
Rashawn Mitchner is a MarketWatch Guides team editor with over 10 years of experience covering personal finance and insurance topics. Key Takeaways: We rate Wells Fargo 3.8 out of 5 stars, our second-lowest rating for one of the country's 10 largest banks.
Is Wells Fargo in trouble? ›
US eases restrictions on Wells Fargo after years of strict oversight following scandal. NEW YORK (AP) — The Biden administration eased some of the restrictions on banking giant Wells Fargo, saying the bank has sufficiently fixed its toxic culture after years of scandals.
What is the Judgement from Wells Fargo? ›
CFPB Orders Wells Fargo to Pay $3.7 Billion for Widespread Mismanagement of Auto Loans, Mortgages, and Deposit Accounts | Consumer Financial Protection Bureau.
Who was at fault for the Wells Fargo scandal? ›
After previously denying any wrongdoing, Tolstedt becomes the first Wells Fargo executive to be held criminally culpable for a scandal that resulted in the firing of 5,300 employees for falsifying bank records and other ethics violations.
What should business leaders take away from the Wells Fargo scandal? ›
Employees in Well Fargo were pressured to make sales, and this led to the creation of fake accounts. Leaders should focus on of setting goals that are achievable and will not encourage unethical methods of making sales. Also, leaders should apply ethical considerations in business.
How much money did Wells Fargo lose after the scandal? ›
' Following Wells Fargo's $3 billion penalty over a financial scandal, the bank reported a 50% loss in profit for the fourth quarter.
