From [HERE] and [HERE] Evidence of racially discriminatory lending practices, a scandal involving millions of accounts unauthorized by customers and other improper procedures have hit Wells Fargo (WFC) bank with a lower regulatory rating.
In the latest blow to Wells Fargo’s efforts to rebuild its reputation after months of turmoil, the bank on Tuesday received a failing score on community lending from its federal regulator. The report is [HERE]
Wells Fargo was given a “needs to improve” rating on its latest evaluation under the Community Reinvestment Act, a 1977 law intended to promote lending in low-income neighborhoods.
Drawing on both public material and confidential information obtained during its review, the bank’s regulator, the Office of the Comptroller of the Currency, said it had uncovered “an extensive and pervasive pattern and practice of discriminatory and illegal credit practices across multiple lines of business within the bank, resulting in significant harm to large numbers of consumers.”
The regulatory action came on the same day that the bank agreed to pay $110 million to settle a class-action lawsuit over its creation of unauthorized customer accounts. The bank has been under fire since its admission in September that over the course of several years, employees trying to meet aggressive sales quotas opened as many two million fraudulent accounts.
The proposed settlement will cover all those who claim that Wells Fargo opened or applied for an account in their name without their consent, from 2009 to the present.
Under its agreements with regulators, the bank has already refunded $3.2 million to customers who were charged fees on unauthorized accounts. The $110 million will be used for additional remediation measures, Wells Fargo said.
Wells Fargo has pushed many customers seeking redress for sham accounts out of the court system and into arbitration. Wells Fargo said it had agreed to resolve those cases outside arbitration, as part of this proposed settlement, “in order to move forward and avoid continuing litigation.”
The comptroller’s office criticized Wells Fargo’s creation of unauthorized accounts in its report, but it also pointed to at least nine other examples of what it called “egregious” violations by Wells Fargo that harmed borrowers.
In particular, the agency said it had reason to believe that from 2004 to 2008, independent mortgage brokers working with Wells Fargo discriminated against black and Hispanic borrowers, charging them higher fees than white customers paid. In 2012, the bank agreed to pay $175 million to settle the accusations without admitting any wrongdoing. The agency also cited multiple settlements Wells Fargo had paid for violating rules on lending to members of the military.
In a SEC filing Tuesday, the bank said the downgrade would impose restrictions on some activities, such as engaging in non-bank mergers and acquisitions. The downgrade also means the bank will lose expedited processing of applications for some activities and will be required to receive prior regulatory approval for opening or relocating bank branches and certain other business actions.