In a significant development, following the slow pace of Wells Fargo & Co’s efforts to compensate victims of its fraudulent sales practice scandals, U.S. regulators have now warned the bank that it potentially faces new sanctions.
The Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) have both signaled to the bank they are dissatisfied with its progress on compensating victims of its fraudulent sales practice, including its attempts to improve its governance and risk controls.
With the news reaching the market, Wells Fargo’s stock fell by 5.6%.
Representatives from the CFPB and the OCC did not immediately respond to requests for comments.
Wells Fargo declined comment.
Wells Fargo, the fourth-largest in the US, has been dogged by persistent costs and restrictions tied to its years-old sales practice scandals wherein employees opened nearly 3.5 million phony accounts in customers’ names without their permission in order to artificially boost internal sales targets.
In 2016, Wells Fargo reached a $190 million settlement with the CFPB, the OCC and a Los Angeles prosecutor over its practice.
In 2018, the Federal Reserve ordered the bank to keep its assets below $1.95 trillion until it had improved governance and risk controls, and it entered into a sweeping consent order with the OCC related to selling of mortgage and auto-insurance products.
The asset cap has constrained the bank’s ability to make loans or grow, said its executives in July. In the event of further sanctions, the bank’s growth prospects could be majorly impacted.