Wells’ penalty too light?
CFPB fine could have exceeded $10 billion, an agency memo says.
The Consumer Financial Protection Bureau could have fined Wells Fargo & Co. more than $10 billion for its illegal sales practices but instead settled for $100 million, according to the agency’s internal documents released by congressional Republicans this week.
The CFPB also had evidence the bank’s sales problems went back to at least 2006 — far earlier than the 2011-to-2016 timetable Wells Fargo originally admitted to, the documents show.
“The bank knew since at least 2006 that its employees were gaming its incentive compensation program, yet failed to take actions sufficient to stop it,” CFPB employees wrote in a 2016 confidential memo.
The documents were released as part of a politically charged report by the staff of the House Financial Services Committee chairman, Rep. Jeb Hensarling (RTexas). Hensarling is a critic of the CFPB who, along with other House Republicans, has called for the firing of CFPB Director Richard Cordray — an appointee of President Obama — and for new laws to curtail the bureau’s authority over the financial services industry.
It would take months for San Francisco-based Wells Fargo to admit publicly that its sales practices problems, in which employees trying to reach unrealistic sales goals opened accounts in customers’ names without those customers’ knowledge or permission, began earlier than 2011. At first, Wells Fargo’s then-chief executive, John Stumpf, agreed to expand the bank’s internal investigation to 2009. When testifying in front of Congress in September 2016, he was reluctant to go back further than that.
Eventually — in a report issued by the bank’s board of directors this year, roughly seven months after the CFPB’s fine — Wells Fargo would admit the sales practice problems began as early as 2002.
It is not clear why the CFPB chose 2011 as the original cutoff date for getting Wells Fargo to admit its sales practice problems. A Wells Fargo spokeswoman declined to comment on the date issue but said the bank is reviewing the report.
CFPB employees estimated that based on the 2 million unauthorized accounts that Wells Fargo’s employees had opened, the penalty against the bank could be in excess of $10 billion before taking into account mitigating factors. That’s according to a confidential memo written to Cordray in July 2016 that outlined potential sanctions the bureau could take.
CFPB employees ultimately recommended a $100-million fine against Wells Fargo — representing the largest fine ever levied in the CFPB’s history at the time — to “sufficiently deter similar violations” by the bank and its competitors.
Cordray accused House Republicans of “Monday morning quarterbacking.”