If you're banking with the San Francisco-based mega-bank Wells Fargo (WFC), you've likely noticed that the company just can’t seem to stay out of hot water. The last few months have seen the bank's name in headlines for a lot of very no-good reasons.
Most recently, the bank came under fire from Sen. Elizabeth Warren (D-Mass.) for its use of the fast-cash bank-to-bank transfer service known as Zelle. The service was created in a partnership between several major banks, including Wells Fargo, Bank of America (BAC) , JP Morgan Chase (JPM), and more to offer a transfer option similar to that of PayPal (PYPL).
The convenience of transfers directly between accounts was certainly a great move--but not without its cracks. According to Warren, Zelle’s structure allowed for $90 million worth of fraud and scams, and it was a particular problem with Wells Fargo.
Not long before that, Wells Fargo was called out for discriminatory practices after closing long-time accounts without warning. In the same month, a handful of Senators sent the bank a letter addressing issues of discrimination during the interview process.
Last Friday, the Consumer Financial Protection Bureau (CFPB) launched an investigation into some of the bank's practices--and it could leave the bank with very substantial hole in its pocket.
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CFPB Investigates Wells Fargo
The CFPB is taking a hard look at Wells Fargo’s automobile lending, consumer-deposit accounts, and mortgage lending practices. The investigation could cost the bank more than $1 billion in settlement fees. It could also result in the CFPB levying restrictions against the bank. According to the report, Wells Fargo is in “resolution discussions” with the CFPB. No financial penalties or restrictions have been enacted at this time.
CFPB Director Rohit Chopra has spoken in the past about the need for more impactful penalties against major companies that repeatedly break the rules. And Wells Fargo’s track record doesn’t look great. In 2018, the CFPB fined the bank $1 billion for overcharging for mortgages and issues with its auto loan insurance. Two years earlier, Wells Fargo coughed up $100 million for opening fake consumer accounts to inflate quota numbers.
Ongoing Wells Fargo Investigations
The Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) have also been looking at the bank. The probes came after a New York Times article alleged that Wells Fargo was hosting fake job interviews to bolster internal diversity requirements.
The report claims that Wells Fargo would continue to interview nonwhite and female applicants after positions had already been filled. The practice would help the company adhere to an internal policy to interview a larger number of diverse candidates.
Depending on the outcome of one or both of these investigations, Chopra and the CFPB could consider more than just financial measures to punish the bank. Chopra has suggested that these penalties include the removal of necessary operating licenses and other government privileges.
It's hard to imagine Wells Fargo taking a hit large enough to make an impact on its business. But there could also be an example made of the major company. The CFPB has plenty of repeat offenders who don't seem phased by the bureau. CFPB has taken multiple actions against Citigroup (C), JPMorgan Chase, American Express (AXP), and Discover (DFS).
