December 22, 2022
3.7 Billion Reasons to Care About Governance
As Lawrence blogged yesterday on PracticalESG.com, the CFPB posted this consent order with Wells Fargo earlier this week, in which the bank agreed to pay $2 billion to customers to compensate for improper fees and illegal repossessions and foreclosures, along with a record $1.7 billion civil penalty. That topped the previous record of $1 billion, which was the fine assessed against Wells Fargo in 2017. The CFPB’s announcement made a big deal about the company being a repeat offender.
Bloomberg’s Matt Levine characterized the order as “basically just a litany of ‘Wells Fargo’s computers messed up.” With 20/20 hindsight, what corporate governance practitioners can take away from this settlement is that federal agencies don’t give a “pass” for operational oversights. They are paying attention to what they deem to be governance failures, which means that boards need to ask questions aimed at catching stuff like this, including with respect to product launches and growth initiatives, before mistakes become widespread. From the CFPB:
While today’s order addresses a number of consumer abuses, it should not be read as a sign that Wells Fargo has moved past its longstanding problems or that the CFPB’s work here is done. Importantly, the order does not provide immunity for any individuals, nor, for example, does it release claims for any ongoing illegal acts or practices.
While $3.7 billion may sound like a lot, the CFPB recognizes that this alone will not fix Wells Fargo’s fundamental problems. Over the past several years, Wells Fargo executives have taken steps to fix longstanding problems, but it is also clear that they are not making rapid progress. We are concerned that the bank’s product launches, growth initiatives, and other efforts to increase profits have delayed needed reform.
– Liz Dunshee