July 30, 2020

Warren, Schatz to Wells Fargo: New Reports Show Mistreatment of Customers During Pandemic-Induced Financial Crisis, Highlighting Broken Culture at the Bank

According to reports, Wells Fargo has been placing borrowers who are not delinquent on their loans in mortgage forbearance programs without their consent "This recent reporting highlights the broken culture at the bank, and the need for Wells Fargo to remain under intense regulatory scrutiny until it is clear that the necessary changes have been made to ensure that the bank is truly committed to its consumers."

Text of Letter

Washington, DC - United States Senators Elizabeth Warren (D-Mass.), a member of the Senate Banking Committee, and Brian Schatz (D-Hawai'i.), sent a letter to Charles W. Schaft, Chief Executive Officer and President of Wells Fargo, following reports about the bank placing borrowers who are not delinquent on their loans in mortgage forbearance programs without their consent and putting consumers at risk of greater financial hardship in the midst of one of the worst economic collapses in history. The Senators note that the new reports again reveal a broken culture at Wells Fargo, a bank that appears to be incapable of self-governance, raising more questions about Wells Fargo's (and its leadership team's) inability to comply with the law. 

"We write to request more information about recent reports that Wells Fargo has been placing borrowers who are not delinquent on their loans in mortgage forbearance programs without their consent and putting consumers at risk of greater financial hardship amidst one of the worst economic downturns in our country's history," wrote the lawmakers. "This includes reports of misrepresentations to bankruptcy courts about borrowers' requests for forbearance. These reports are highly disturbing given Wells Fargo's recent history of illegal behavior and inappropriate treatment of customers, including over a dozen scandals involving the creation of millions of fake customer accounts, illegal repossession of servicemembers' cars, wrongful foreclosure on hundreds of homes, illegal add-on charges to customers' accounts, and much, much more." 

As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Wells Fargo provided a forbearance option that allows borrowers experiencing financial hardship to delay payments on their mortgages for up to six months and in some circumstances for up to a total of 12 months.  

However, in recent weeks, a report revealed that bankruptcy attorneys have identified multiple cases "where Wells Fargo has wrongly claimed that borrowers asked to pause their mortgage payments in forbearance plans," and "that the bank put through secondary requests for forbearance on behalf of homeowners who had asked to participate in the program initially but who no longer wanted to." Borrowers only learned of Wells Fargo's actions from their lawyers rather than from the bank itself, according to reports. These forbearance filings that were based on nonexistent requests from customers "in Chapter 13 bankrupcy cases can put borrowers' homes at risk of foreclosure and represent a fraud against the bankruptcy court," in addition to potentially harming their credit. Moreover, because of the way loan servicers are compensated for forbearance, it is possible that Wells Fargo was able to profit on each forbearance filing. 

Another report found that borrowers in at least 14 states who were not delinquent on their loans had their mortgages wrongly put into forbearance without their knowledge or consent merely because they sought information on Wells Fargo's programs to help consumers having trouble paying their bills because of COVID-19 related economic difficulties. These consumers were hurt in several ways by this practice: they did not receive credit for several months of payments, their credit reports may have been damaged, and they may have lost the opportunity to modify or refinance their mortgages while interest rates were at record lows.

Senators Warren and Schatz asks Wells Fargo to respond to ongoing concerns about the bank's ability to comply with the law and treat its customers fairly by no later than August 12, 2020

Senator Warren is a life-long consumer advocate who has led the charge to hold Wells Fargo senior management accountable since the fake-accounts scandal from 2011 to 2015 came to light, and during additional cases of fraud at the bank (listed in chronological order):

·       On September 20, 2016, Senator Warren called on former Wells Fargo CEO and Chairman John Stumpf to resign for his role in the fake accounts scandal. 

o   Mr. Stumpf resigned on October 12, 2016.

·       On June 19, 2017, Senator Warren sent a letter to then-Fed Chair Janet Yellen urging the Federal Reserve to remove 12 Wells Fargo board members following the fake accounts scandal. When more than 800,000 Wells Fargo customers were charged for auto insurance they did not need, Warren once again demanded changes at the board and doubled-down when the bank failed to refund money owed to car loan customers, overcharged small businesses for credit card transactions, and billed certain mortgage customers for unexpected, optional services. 

o   On February 2, 2018, Chair Yellen announced in response to Senator Warren that the Federal Reserve would freeze the growth of Wells Fargo and push out four of the board members responsible.

·       In March 2018, Senator Warren introduced the Ending Too Big to Jail Act to hold big bank executives accountable when the banks they lead break the law.

·       In March and April 2018, Senator Warren urged Federal Reserve Chair Jerome Powell to hold a public vote by the Federal Reserve Board on lifting growth restrictions for Wells Fargo instead of delegating it to staff. She also asked for the public release of the third-party review of how Wells Fargo is implementing reforms.

o   In a response to Senator Warren on May 10, 2018, Chair Powell reconsidered and announced he would require a Federal Reserve Board vote on whether to lift Wells Fargo's growth restrictions and said he would consider releasing as much of the third-party review as possible.

·       On October 18, 2018, Senator Warren urged Chair Powell to maintain the growth cap on Wells Fargo until Tim Sloan was replaced as CEO, citing eleven instances of serious misconduct at Wells Fargo while Mr. Sloan served in senior roles at the bank.

·       On January 17, 2019, Senator Warren questioned Tim Sloan on excessively high fees Wells Fargo charged college students.

o   On April 4, 2019, Wells Fargo announced it had eliminated some of these fees associated with campus debit cards.

·       In February and March of 2019, Senator Warren once again urged Chair Powell to keep growth cap restrictions on Wells Fargo in place, citing a report that beginning in 2016, Wells Fargo employees "routinely falsified clients' signatures and otherwise doctored paperwork" in order to comply with a legal settlement with the OCC related to violations of anti-money laundering laws. She continued to call for CEO Tim Sloan to be fired for his role overseeing massive fraud at the bank.

o   On March 28, 2019, Tim Sloan announced that he was stepping down as Wells Fargo CEO.

·       In April 2019, she reintroduced the Ending Too Big to Jail Act and introduced the Corporate Executive Accountability Act, legislation that would make executives of big corporations criminally liable if their companies commit crimes, harm large numbers of people through civil violations, or commit new violations while under the supervision of the court or a regulator for a previous violation.

·       On April 9, 2019, Senator Warren and Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) released new letters from the Fed, the OCC, and CFPB that said Wells Fargo had not satisfied its obligations under existing consent orders.

·       On April 17, 2019, Senator Warren wrote to Joseph Otting, Comptroller of the Currency, requesting information about the role that the OCC will play in the selection of a new CEO and President of Wells Fargo.

o   In response to Senator Warren's letter, Comptroller Otting confirmed that the OCC would exercise its statutory authority to review the selection of a new CEO of Wells Fargo.

o   On May 15, 2019, Senator Warren pressed Comptroller Otting at a Banking Committee hearing to make the results of its statutory review public.

·       On August 20, 2019, Senator Warren sent a letter to Wells Fargo & Company requesting information about a new report that the bank kept accounts active for months after they had been closed by customers and charged customers hundreds or even thousands of dollars in overdraft fees for charges made against these "closed" accounts.

·       On August 30, 2019, Senator Warren sent letters to the CFPB, the SEC, and Comptroller of the Currency Joseph Otting, expressing concern that Wells Fargo may have once again intentionally misled investors--this time about the strength of their customer base. She also made public Wells Fargo's response that confirmed the bank was investigating these new reports. 

·       On February 12, 2020, Senator Warren raised the alarm on potential changes to the Fed's bank supervision process involving Matters Requiring Attention (MRAs), critical tools that bank examiners use to communicate violations of law and other areas of risk to financial institutions, citing Wells Fargo's fraudulent activities as an example of the need for this oversight.

·       In an April 2020 letter to the nation's major mortgage servicers, including Wells Fargo, Senator Warren urged the banks to immediately and accurately notify eligible homeowners of the foreclosure and forbearance protections available to homeowners experiencing a financial hardship that were included in the  Coronavirus Aid, Relief, and Economic Security (CARES) Act.