Wells Fargo faces new penalties

Bank’s growth will be frozen, and it must replace four members of its board

WASHINGTON» The Federal Reserve announced Friday it is imposing more penalties on Wells Fargo, freezing the bank’s growth until it can prove it has improved its internal controls. In addition, the bank agreed to replace four board members.

It’s the latest blow against the San Francisco bank that has had its reputation tarnished that it has improved its internal controls.

The announcement came after the close of trading on Wall Street Friday. The bank’s stock fell more than 6 percent in afterhours trading.

Wells Fargo has 16 members on its board of directors. It agreed to replace three directors by April and another one by yearend. The letter did not say if particular board members were being singled out.

In a statement, Wells Fargo said it is “confident” it will satisfy the Fed’s requirements.

“We take this order seriously and are focused on addressing all of the Federal Reserve’s concerns,” the bank’s CEO, Timothy Sloan, said. “It is important to note that the consent order is not related to any new matters, but to prior issues where we have already made significant progress.”

The Fed’s new order marked the latest chapter in a series of scandals which have rocked the bank in recent years.

Wells Fargo has admitted that employees opened more than 3 million fake accounts in order to meet sales quotas. It ended up paying $185 million to regulators and settled a class-action suit for $142 million.

It also has admitted it signed up hundreds of thousands of auto loan customers for auto insurance they did not need. Some of those customers had their cars repossessed because they could not afford both the auto loan and insurance payments.