On Jan 28, Wells Fargo announced that the top U.S. consumer watchdog has lifted a 2022 order that penalized the bank for mishandling auto loans and mortgages, moving it closer to removing the $1.95 trillion asset cap. The Consumer Financial Protection Bureau had accused the bank of repossessing vehicles improperly, charging erroneous fees, denying qualified borrowers mortgage loan modifications, and mishandling customer accounts. This termination marks the closure of the seventh consent order by regulators since 2019, under CEO Charles Scharf's leadership in a cleanup effort.
RBC Capital Markets analyst Gerard Cassidy viewed this development positively, emphasizing progress in working with regulators. The brokerage anticipates the asset cap being lifted in the first half of 2025. The asset cap, imposed by the Federal Reserve in 2018, inhibits Wells Fargo's growth until regulators determine that past issues dating back to 2016 have been resolved.
Regulators enforced strict oversight over Wells after previous misconduct, resulting in hefty fines and public scrutiny. Chris Marinac, director of research at Janney Montgomery Scott, highlighted that these recent actions bring Wells Fargo closer to potentially lifting the asset cap this year.
The bank's efforts to rectify regulatory issues have not gone unnoticed by investors. Janney Montgomery Scott Commissioner and Zacks Investment Management's portfolio manager, Brian Mulberry, expressed optimism about the bank's progression. The bank's shares soared almost 43% in 2024, surpassing the S&P 500 index and a benchmark for large-cap banks. Scharf conveyed confidence in the bank's ability to fulfill requirements in consent orders and instill an operational risk and compliance mindset into its culture.