Fargo as bank reportedly fails fair lending requirement
The dark clouds surrounding Wells Fargo are about to get a lot darker, as the bank, which is already in hot water over its recent fake account scandal, is reportedly falling short in its fair lending requirements and faces additional sanctions.
Over the last few months, Wells Fargo has been in the crosshairs of various regulators after the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau and the city and county of Los Angeles fined Wells Fargo $185 million because more than 5,000 of the bank’s former employees opened approximately 2 million fake accounts in order to get sales bonuses.
In the fallout from the fake account scandal, Wells Fargo CEO John Stumpf lost his job, the bank lost business from several states, and the OCC slapped additional sanctions on it, including forcing the bank to ask the OCC for approval if it wants to make a change to its board of directors or its senior executive officers.
Now, according to a new report from Reuters, Wells Fargo is about to be more hot water with the OCC for reportedly failing to meet its requirements under the Community Reinvestment Act.
Under the Community Reinvestment Act guidelines, banks are legally required to meet the credit needs of low- and moderate-income communities.
Wells Fargo is due to be deemed a bank that “needs to improve” under the Community Reinvestment Act (CRA), a law meant promote fair lending.
The move is a two-notch downgrade from the “outstanding” tag Wells Fargo has held since 2008 and the change would give regulators a greater say on day-to-day matters like opening new branches.
The ruling from the Office of the Comptroller of the Currency, the main regulator for national banks, is due by early January, said the sources with knowledge of the plans.
The ruling would be significant, considering Wells Fargo’s status as one of the largest (if not the largest) mortgage lenders in the country.
Reuters cautions that Wells Fargo could win an appeal of the downgrade. According to the Reuters report, that decision is still pending.