The House Financial Services Committee says Wells Fargo's board and senior management failed to comply with consent orders issued by regulators in response to the bank’s widespread consumer abuses, according to a document released by committee Democrats Wednesday evening.
In a scathing report, lawmakers also accused federal regulators of failing to hold the bank accountable for its misdeeds, which included opening phony accounts, charging unnecessary auto insurance, and overcharging military service members to refinance mortgages.
The 113-page report also claims former Wells Fargo CEO Tim Sloan gave inaccurate and misleading information to Congress during his testimony in March, 2019.
The release of the committee’s year-long report into Wells Fargo's consumer abuses comes weeks after the bank agreed to pay $3 billion to the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) as part of a settlement over the bank's fake-accounts scandal.
The country’s fourth-largest bank has been under scrutiny from lawmakers and regulators since 2016, when Wells Fargo employees were found to have created roughly 3.5 million fake accounts to receive sales-based incentives.
The bank was also ordered by the SEC last week to pay $35 million to unsuspecting clients harmed by its high-risk investment advice.
"This Committee staff report shines a much-needed spotlight on 'The Real Wells Fargo,' a reckless megabank with an ineffective board and management that has exhibited an egregious pattern of consumer abuses," House Financial Services Committee Chairwoman Maxine Waters, D-CA, said in a statement.
The report says financial regulators, including the Office of the Comptroller of the Currency and the Federal Reserve, "knew about serious, enterprise-wide deficiencies at Wells Fargo for years without taking public enforcement action" and the bank’s board of directors "failed to ensure management could competently address the company’s risk management deficiencies."
The document also claims the bank and the Consumer Financial Protection Bureau’s (CFPB) political appointees had back channel communications regarding the agency’s compliance risk management consent order.
Former CFPB official Eric Blankenstein told former interim Wells Fargo CEO Allen Parker there would be "political oversight" of its enforcement actions, the report claims.
Blankenstein, who now works at the Department of Housing and Urban Development, resigned from the CFPB in May following a Washington Post report that he used racially charged language in a blog in 2004.
Emails between Wells Fargo executives also show a "lack of urgency" regarding consent orders and a reluctance to meet with regulators, the report claims.
In a release, the committee concluded "the potential for widespread consumer harm still remains at Wells Fargo," and recommended Congress strengthen the regulators' authorities and enhance bank management and board accountability.
The committee also called for regulators to "act against recidivist megabanks" and called for greater transparency regarding bank supervision and the way banks treat consumers.
House Financial Services Committee Republicans are expected to publish their own report from the investigation, according to Politico.
The report comes ahead of next week’s back-to-back hearings in front of the House Financial Services Committee, where new Wells Fargo CEO Charlie Scharf and board members, including Chair Betsy Duke and James Quigley, are scheduled to testify.
Ahead of the hearings, Wells Fargo has made several announcements that may reflect the bank’s effort to show regulators and lawmakers that it’s implementing positive changes.
The San Francisco-based bank said it plans to offer two new bank accounts that limit overdraft fees for customers next year, and also announced it would raise its minimum hourly wage in a majority of its U.S. markets by the end of the year.
Last month the bank announced an end to its policy of mandatory arbitration for employees claiming sexual harassment, a policy critics say allows companies to keep complaints from coming to light and avoid costly lawsuits.
The bank has also announced a restructuring that involves splitting its three business units into five, a move Scharf said will provide more accountability across the bank.