Removing the Wrong Shackles

Over the past decade, Wells Fargo has been a poster child for corporate greed and misconduct. In 2016 the Consumer Financial Protection Bureau revealed that the bank had been ordering its employees to create unauthorized accounts for existing customers in order to generate illegitimate fees.

The CFPB fined Wells Fargo $100 million in what would be the first in a series of enforcement actions and lawsuits that have cost the bank more than $8 billion in penalties for the bogus accounts and other offenses such as improper foreclosures and overdraft fees. Along with those monetary punishments, in 2018 the Federal Reserve took the unusual step of putting a limit on the bank’s ability to increase its assets until it improved its governance and internal controls.

Now, in 2025, the CFPB has effectively been dismantled by the Trump Administration’s anti-regulatory steamroller, while the Fed just announced it is removing the asset limit. According to the bank regulator, “the removal of the growth restriction reflects the substantial progress the bank has made in addressing its deficiencies.”

There are two ways to view this decision. On the one hand, the Fed demonstrated that a penalty other than a fine can be quite effective. While Wells remained capped, its big competitors such as JPMorgan Chase and Bank of America experienced enormous asset growth. Being shut out of the expansion certainly made an impression on the new leadership installed at Wells as a result of the scandals.

On the other hand, the track record of Wells since 2018 has not been spotless. In 2022 the CFPB imposed a $1.7 billion fine on the bank and ordered it to pay $2 billion in consumer redress for a variety of illegitimate practices both before and after the Fed enforcement action. The practices included surprise overdraft fees and improper interest charges on auto and mortgage loans.

In 2021 the Office of the Comptroller of the Currency fined Wells $250 million for unsafe practices related to material deficiencies in its loss mitigation activities.

Wells has also been penalized for misconduct in its securities and trading operations. Since 2019 it has paid over $250 million in fines and settlements to the Securities and Exchange Commission as well as $89 million to the Commodity Futures Trading Commission.

Regulators have punished Wells for its employment practices. The Occupational Safety and Heald Administration, which enforces the whistleblower protection provisions of the Sarbanes-Oxley Act found that the bank had improperly fired a manager who complained about illegal practices and ordered that the manager be paid $22 million in damages. The U.S. Labor Department and state regulators in California and New York have cited Wells for wage and hour violations.

Along with government enforcement actions, Wells continues to face a steady stream of class action lawsuits. In recent years it has paid out large sums in settlements, including $185 million to resolve litigation alleging it improperly put mortgages of struggling customers into forbearance without informed consent during the Covid pandemic, damaging their credit rating.

Wells Fargo may no longer be defrauding customers through the creation of bogus accounts, but it appears unable to avoid numerous other types of misconduct. It thus does not deserve relief from the Fed’s restrictions.

If any shackles are to be removed, they should be the ones unjustly being imposed on CFPB rather than those properly put on Wells Fargo.

web version: https://dirtdiggersdigest.org/archives/7819