The staff report from the U.S. House Financial Services Committee recommends that Congress:
* Compel regulators to act against recidivist megabanks, like Wells Fargo & Co., that engage in widespread consumer abuses;
* Strengthen the regulators' authorities and enhance bank management and board accountability;
* Require greater transparency regarding bank supervision and how banks treat consumers;
* Enhance bank compensation practices; and,
* Pass a bank workers' bill of rights.
Wells Fargo & Co. said Thursday it is limiting employee domestic air travel in the U.S. in response to the national spread of the coronavirus.
"Out of an abundance of caution, we are now restricting all non-essential business air travel in the United States, and requiring executive-level approval for any business air travel deemed essential," Wells Fargo spokeswoman Beth Richek said in a statement.
"We continue to follow all public health guidance, and we remain focused on meeting the needs of our customers, while reducing the risk to our employees and customers."
The bank had earlier restricted international business travel.
Wells Fargo has 2,900 local employees, as well as 3,600 altogether in its 32-county Triad West region, and 25,100 in Charlotte.
Wells Fargo & Co. has failed to fully comply with five regulatory orders issued in response to the bank's fraudulent customer-account scandal, according to a U.S. House Finance Services committee report released Wednesday.
The report was accompanied by quotes from two prominent congressional critics of Wells Fargo since the scandal surfaced publicly 3½ years ago: chairwoman Maxine Waters, D-Calif., and Rep. Al Green, D-Texas.
The report - titled "The real Wells Fargo: board & management failures, consumer abuses and ineffective regulatory oversight" represents a yearlong investigation into Wells Fargo's compliance with regulatory orders made in 2016 and 2018.
The 113-page report was based partly on internal Wells Fargo memos and e-mail exchanges.
It was made public ahead of Tuesday's scheduled appearance of chief executive Charlie Scharf before the committee, along with Wells Fargo chairwoman Betsy Duke and board member James Quigley on Wednesday.
Waters said the report confirms her belief that Wells Fargo is "a reckless megabank with an ineffective board and management that has exhibited an egregious pattern of consumer abuses."
On Thursday, she called for the resignation of Duke and Quigley. "They failed in their responsibilities as board members, and they should be shown the door," Bloomberg News quoted Waters as saying.
A summation of the report determined "the potential for widespread consumer harm still remains at Wells Fargo."
Republican members of the House Finance committee issued their own analysis of the report Thursday. Rep. Patrick McHenry, R-N.C., is the GOP leader on the committee.
Republicans agreed with the assessment that "Wells Fargo's uniquely flawed structure and gross mismanagement have stunted the company's response to the scandal."
They also blamed lax regulators under the Obama administration for "being slow to recognize the risk," allowing the scandal to become as widespread as it did.
"Wells Fargo was no closer to complying with the regulators' consent orders when (former chief executive) Tim Sloan resigned in March 2019 than when his team took over in 2016," according to the GOP statement. "The management team of company insiders failed to understand the scope of the company's problems when Sloan took charge in 2016.
"A deficit of in-house risk management expertise stalled the company's efforts to remediate customers and develop a risk management plan.
"Now, the firm's regulators - the CFPB, the Office of the Comptroller of the Currency and the Federal Reserve - are making up for lost time under new (Trump administration) leadership."
Sloan receives criticism
Wells Fargo has 3,600 employees in its 32-county Triad West region, including 2,900 locally. It has 25,100 employees in Charlotte.
The bank acknowledged in 2017 the opening and issuing of at least 3.53 million unauthorized checking and savings accounts, debit cards and credit cards between 2009 and October 2016.
Although the bulk of the fraudulent accounts were established in California and Arizona, the bank has said it cannot rule out that 38,722 unauthorized customer accounts were established in North Carolina and 23,327 in South Carolina.
Sloan, who resigned in March 2019 after 2½ years in the role, drew much of the scrutiny in the report.
The report cited that Sloan "gave inaccurate and misleading testimony to Congress" during a March 2019 Finance committee hearing in which he discussed the bank's efforts to fix its customer-account problems. Waters said she is considering asking the U.S. Justice Department to review Sloan's comments.
"Key leaders at Wells Fargo were focused on lifting the Federal Reserve's asset cap, rather than addressing the company's systemic risk management weaknesses," according to the report.
The biggest shadow still hanging over Wells Fargo is the Fed's order, issued Feb. 3, 2018, that prohibits the bank from increasing its total assets beyond the $1.93 trillion it had on Dec. 31, 2017.
"Wells Fargo has clearly demonstrated an unwillingness and inability to stop harming its customers, so this committee is working overtime to make sure consumers are never subjected to the types of abuses and failures committed by this megabank again," Waters said.
Wells Fargo said it did not have a comment on the report. It cited a statement addressing steps taken by the bank since Scharf became chief executive Oct. 21.
Federal regulators criticized
Green said the report "demonstrates not only that Wells Fargo is failing to comply with the terms of multiple settlement agreements dating back to 2016 and 2018, but also that our federal regulators have simply failed to enforce those agreements, despite having ample tools and authorities under existing law to do so."
The report cited a concerning lack of action and oversight from the U.S. Office of the Comptroller of the Currency and Federal Reserve as Wells Fargo conducted the fraudulent business practices at the heart of the scandal.
"The status quo is unacceptable and must not continue," Green said.
"Wells Fargo must be held to its obligations to restore those whom it has harmed, and it must end the abuses of consumers, as well as the conditions of the bank that have allowed and promoted such abuses."
The report found Wells Fargo executives, led by Sloan, responded to the regulatory orders with actions "that reflect an unwillingness to take seriously the bank's obligations under the 2016 Sales Practices Consent Orders to fully compensate harmed consumers and fix its internal controls."
One example cited was Duke, then acting as vice chairwoman in November 2017, questioned why she was being included in letters from the Consumer Financial Protection Bureau requesting bank actions on regulatory orders.
Comptroller of the Currency Joseph Otting said in a statement Thursday that "Wells Fargo Bank's treatment of its customers and employees and its failure to promptly correct identified deficiencies under its previous management are unacceptable for this or any other bank."
"While the bank still has much work ahead, we are encouraged by the leadership and focus on regulatory matters by the bank's new chief executive," Otting said.
The overall committee staff findings include:
Financial regulators knew about serious, enterprise-wide deficiencies at Wells Fargo for years without taking public enforcement action;Wells Fargo's board failed to ensure management could competently address the company's risk-management deficiencies;Wells Fargo and the Consumer Financial Protection Bureau's political appointees had backchannel communications regarding the bureau's Compliance Risk Management Consent Order;Wells Fargo's board allowed management to repeatedly submit materially deficient plans to regulators in response to the consent orders;Both Wells Fargo's board and management prioritized financial and other considerations above fixing the issues identified by regulators; andWells Fargo's board failed to hold senior management accountable for failing to meet regulators' expectations.
Wells Fargo fines
The report was released about two weeks after Wells Fargo agreed Feb. 21 to pay $3 billion to settle U.S. Justice Department and Securities and Exchange Commission investigations into fraudulent sales practices by its Community Bank division.
The investigation period covered from 2002 until September 2016. At that time, Wells Fargo agreed to pay a combined $185 million in fines to resolve regulatory complaints.
Wells Fargo agreed as part of the $3 billion fine to establish a $500 million "Fair Fund for the benefit of investors who were harmed by the conduct covered in the agreement."
Counting the latest civil penalty, Wells Fargo has agreed to pay more than $7 billion to settle various regulatory and legal disputes since the fall of 2016.
The Justice agreement resolves the criminal investigation into sales-practice activities. No criminal charges will be filed against Wells Fargo "provided Wells Fargo abides by all the terms of the agreement."
The settlements do not prevent the departments from prosecuting current and former employees at a later date.
On Jan. 23, federal banking regulators ordered a $17.5 million fine against former Wells Fargo chairman and chief executive John Stumpf for his role in the scandal. Stumpf agreed to a prohibition order, which includes a lifetime ban from the banking industry.