Wells Fargo just can’t catch a break. In the latest blow to the embattled financial giant, Wells has failed a government fair lending test due to “egregious” evidence of “discriminatory and illegal practices.”
Wells Fargo has been in hot water for some months thanks to a scandal that broke last year, when it was revealed that the bank’s employees, under constant pressure to increase sales, had opened 2 million unauthorized customer accounts. That revelation led to the resignation of CEO John Stumpf, congressional hearings and an internal investigation that’s still ongoing.
Now the Office of the Comptroller of the Currency has handed the bank another penalty in the form of a report that it failed to meet its requirements under the Community Reinvestment Act. The OCC dropped Wells Fargo’s CRA rating from “Outstanding” to “Needs to Improve.”
“The bank’s overall CRA Performance Evaluation rating was lowered from “Outstanding” to “Needs to Improve” as a result of the extent and egregious nature of the evidence of discriminatory and illegal credit practices…” the OCC said in its report.
The OCC report said that between 2004 and 2008, Wells Fargo violated the Fair Housing Act and the Equal Credit Opportunity Act by engaging in “a pattern or practice of discrimination on the basis of race or color” – an estimation that the Department of Justice agreed with. In 2012, the DOJ and Wells Fargo reached a settlement that saw the bank pay $125 million to African American and Hispanic borrowers who were unfairly steered into subprime loans.
The OCC also found that the bank steered potential prime borrowers into more costly subprime loans during the run-up to the financial crisis. The agency also dinged Wells Fargo for the fake-account scandal, saying the opening of unauthorized accounts violated the Consumer Financial Protection Act.
In a statement, Wells Fargo CEO Tim Sloan said the bank had made significant improvements – especially in the area of fair lending – since the OCC’s evaluation period ended.
“We are disappointed with this rating given Wells Fargo’s strong track record of lending to, investing in and providing service to low- and moderate-income communities,” Sloan said.
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