According to Wells Fargo, sanctions from the Federal Reserve regarding the financial institution’s phony account scandal could lead to further losses for the company with their profits potentially losing around $400 million this year.
Last year, the San Francisco-based financial company was involved in a scandal that led to millions of accounts including savings, credit account line, credit card, and checking being opened through the use of existing customer information without their permission. Reports have revealed that this was caused by severely high quotas imposed by managers of the company to its employees.
Investigations then have revealed that millions of accounts which were unauthorized were opened as early as the year 2002 something the bank has revealed personally. Wells Fargo have they reached an agreement worth $100 million in settling around twelve lawsuits filed by customers who claim to have been ripped off with unnecessary fees led by the creation of the fake accounts.
Despite the impending punishment from the Federal Reserve, the company has reached many other deals with various agencies and group lawsuits to soften the blow of the phony accounts scandal. During mid last year, Wells Fargo has been given an approval by a federal judge for a national class action settlement worth $142 million.
Wells Fargo has then also announced other plans it intends to take in order for the company to refocus its businesses and prevent their cash balances from entering negative levels.
This includes their announcement back in July to cut businesses as their work on restoring the trust of both their clients and investors. Wells Fargo which then had over $1 trillion worth of assets has announced that it would evaluate its business model and focus more in providing services and products that are used by their customers more and the ones which give back the biggest returns to its shareholders.
Fed Reserve Sanctions
Last Friday, the American bank was ordered by the Federal Reserve to replace four of its board members through a consent order. The bank then issued an estimated amount of the losses it may suffer for the year which could reach as much as $400 million. This was also caused by the Fed consent order which will restrict the financial growth of Wells Fargo.
According to the Federal Reserve, the opening of more than three million unauthorized accounts has been referred to as consumer abuse and compliance breakdown. According to the statement issued by Janet Yellen who issued the statement prior to the expiration of her term as the chair of the Federal Reserve stated that the Fed would not tolerate “pervasive and persistent misconduct at any bank”.
The statement also stated that the Fed would make sure that the consumers affected by the actions of Wells Fargo should expect comprehensive and robust reforms to be put in place to ensure that such instances will not occur again.