Today, Wells Fargo announced an agreement in principal to settle a class action lawsuit, regarding claims that Wells Fargo opened accounts without the consent of its customers. This comes on the heels of the announcement of the bank's Community Reinvestment Act Rating (CRA), in which it received high scores from the Office of the COmptroller of the Currency (OCC), despite an overall score of "needs improvement."
The score is a downgrade, as Wells Fargo had previously been given an overall “outstanding” score on the CRA. Despite high marks for all-around service, the recent lawsuit contributed to the downgrade.
"Violations across multiple lines of business within the bank (resulted) in significant harm to large numbers of customers," the OCC said in its filing.
The bank agreed to set aside $110 million in customer remediation, and class members class members will be paid first for out-of-pocket losses after attorney's fees and cost of administration.
“This agreement is another step in our journey to make things right with customers and rebuild trust,” said Tim Sloan, Wells Fargo’s President and CEO. “We want to ensure that each customer impacted by our sales practices issue has every opportunity for remediation, and this agreement presents an additional option. We continue to encourage customers to contact us directly so that we can act quickly to refund fees and address any concerns.”
Several other discriminatory or illegal credit practices contributed to the final, low score. The CRA report claims that Wells Fargo showed evidence of noncompliance with the Fair Housing Act and Equal Credit Opportunity Act, as well as violations of the Consumer Financial Protection Act.
The filing stated “The bank failed to implement an effective compliance risk management program designed to properly prevent, identify and correct violations. Further, bank management instituted policies, procedures and performance standards that contributed to the violations for which evidence has been identified.”
Still, Wells Fargo showed high marks in all other areas. On the three components of the exam, Fargo received an “Outstanding” on the Lending Test, an “Outstanding” on the Investment Test, and a “High Satisfactory” on the Service Test.
"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. However, we are committed to addressing the OCC’s concerns because restoring trust in Wells Fargo and building a better bank for our customers and our communities is our top priority,” said Sloan. “Wells Fargo is deeply committed to economic growth, sustainable homeownership and neighborhood stability in low- and moderate-income communities and will continue to invest above and beyond what is required by CRA.”
The results from the CRA Performance Evaluation can be found on Wells Fargo's website, here.