Letter to Marcia Fudge, Secretary of Housing and Urban Development, Rohit Chopra, Director of the Consumer Financial Protection Bureau, Jerome Powell, Chair of the Federal Reserve, Michael Hsu, Acting Comptroller of the Currency, Martin Gruenberg, Acting Chair of the Federal Deposit Insurance Corporation - Chairwoman Waters Calls on Regulators to Hold Wells Fargo Accountable for Continued Troubling Patterns and Practices of Anti-Consumer Behavior

Letter

Dear Secretary Fudge, Chair Powell, Director Chopra, Acting Chairman Gruenberg, and Acting Comptroller Hsu:

I write today to share my profound disappointment and significant concerns regarding the ongoing actions by one of America's largest megabanks, Wells Fargo. Wells Fargo has been under scrutiny by the Financial Services Committee and by your agencies in recent years for a myriad of reasons, including creating almost 3.5 million unauthorized consumer accounts, charging customers for auto insurance policies they did not need, ripping off veterans by overcharging them for refinance loans, and multiple class action suits regarding discrimination against people of color, people with disabilities, and other protected individuals. As I have made clear in the past, Congress has given regulators like yourselves significant tools to properly penalize Wells Fargo for its continuous wrongdoing, and based on Wells Fargo's recent behavior, I am writing to urge you to escalate penalties in a way that is reflective of its history of repeat offenses.

Wells Fargo previously reached a settlement with the Consumer Financial Protection Bureau (CFPB), Office of the Comptroller of the Currency (OCC), and the City and County of Los Angeles in 2016 regarding some of its practices,[1] but these penalties proved to be insufficient to deter future offenses. In September 2017, I released a Democratic Committee staff report detailing further abusive practices by Wells Fargo and outlining where regulators could use the full suite of their authorities to curb a pattern of repeated unlawful behavior.[2] In 2018, the Federal Reserve, under then Chair Janet Yellen's leadership, ordered that Wells Fargo keep its total assets below $1.95 trillion until the bank improved its governance and risk controls.[3] Soon after I took over as Chairwoman of the House Financial Services Committee, I convened a hearing with Wells Fargo's then President and CEO Timothy J. Sloan to explore what progress had been made by the bank's management in cleaning up their act.[4] The answers from Mr. Sloan at our March 2019 hearing were not only lackluster, but as I learned later, inaccurate and misleading. The day after the hearing, we learned Wells Fargo's board had outlandishly awarded Mr. Sloan with a pay increase and a $2 million dollar bonus.[5] I immediately called on Mr. Sloan to step down,[6] and he resigned in disgrace a couple weeks later.[7]

By March 2020, Wells Fargo was still perpetuating consumer abuses, and after conducting an investigation, I released another staff report with Congressman Al Green, Chair of our Subcommittee on Oversight and Investigations, detailing the company's mismanagement.[8] I also notified the Department of Justice of a potential violation of the federal criminal statute prohibiting false statements to Congress as we learned in our investigation that such false statements[9] were made by Mr. Sloan at our March 2019 hearing. Our March 2020 staff report was followed by two more hearings that month investigating Wells Fargo's misconduct -- one with Wells Fargo CEO Charles Scharf and another with Chairwoman Elizabeth Duke and Director James Quigley of Wells Fargo's boards of directors, who both resigned in the wake of the report's release. In 2021, Fed Chair Powell said that the asset cap would remain until the bank fixed its "widespread and pervasive" problems suggesting that Wells Fargo has a long way to go before it would be allowed to expand.[10]

Yet, we continue to learn that the megabank is far from achieving the vision that CEO Scharf put forward at his first townhall in 2020, when he stated: "Our work has tremendous impact upon people. We need to recognize that and make sure that we're doing everything we can to operate the company to the highest standards of operational excellence." While Wells Fargo has continued to rake in billions of dollars in profit -- more than $21 billion in 2021 alone[11] -- and their CEO received a 20% increase in compensation to total more than $24 million in 2021-- the megabank's misdeeds continue.[12] For example, on September 9, 2021, the OCC imposed several restrictions on Wells Fargo along with a $250 million civil money penalty.[13] The agency found the megabank violated its 2018 consent order and found material deficiencies regarding the megabank's home lending loss mitigation activities, including mortgage servicing and loan modification decisions, operational practices, and inadequate risk management and auditing of such activities, which resulted in errors that negatively affected borrowers and impaired Wells Fargo's ability to provide full and timely remediation for harmed consumers.[14]

Moreover, Bloomberg has revealed large disparities in Wells Fargo's mortgage refinancing operations. By sheer volume, Wells Fargo was the largest bank mortgage provider to Black homeowners in 2020, and helped more Black customers refinance their homes than any other bank. However, "only 47% of Black homeowners who completed a refinance application with Wells Fargo in 2020 were approved, compared with 72% of White homeowners…While Black applicants had lower approval rates than White ones at all major lenders, the data show, Wells Fargo had the biggest disparity and was alone in rejecting more Black homeowners than it accepted."[15] Consumers and homeowners deserve to be treated with respect and it is their civil right under the Fair Housing Act and the Equal Credit Opportunity Act to access credit equally and fairly, regardless of the color of their skin. Wells Fargo has continued to dismantle the little trust that the public has in it and must be held accountable to the full extent of the law.

Additionally, The New York Times reports that Wells Fargo staff have inflated their diversity, equity, and inclusion data by conducting "fake" interviews with women and candidates of color.[16] According to the article, the interviews "seemed to be more about helping Wells Fargo record its diversity efforts on paper--partly in anticipation of possible regulatory audits--rather than hiring more women or people of color."[17] Recently, The New York Times also reported that federal prosecutors are investigating these "sham" interviews and if federal laws were violated.[18] To be clear, commitments to diversity, equity, and inclusion are not stunts to be taken advantage of by megabanks; diversity, equity, and inclusion encompass aspects of both moral and legal obligations that financial institutions hold. It is unacceptable that Wells Fargo would mislead applicants and the public.

The need for warnings and "cost of doing business fines" have long passed. The asset cap imposed by now-Treasury Secretary Janet Yellen has failed to force the bank to change its behavior. Despite Mr. Scharf's leadership, Wells Fargo continues to display a troubling pattern of bad behavior with an inability to competently redress such patterns. Wells Fargo and other mega-financial institutions must face real consequences to curb their recidivism. I previously introduced legislation directing the banking regulators to use their severe authorities to immediately stop Wells Fargo from harming customers, and I plan to do so again. My legislation will improve oversight and governance of megabanks while ensuring repeat offenders like Wells Fargo can no longer abuse their customers or lie to the public. I am also calling on the CFPB, OCC, FDIC, Federal Reserve, and HUD to take immediate action to end this pattern and practice of egregious consumer abuses at Wells Fargo and finally hold this repeat offender accountable.

Sincerely,

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