Wells Fargo's CRA rating improves to 'outstanding'

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Three years after slashing Wells Fargo’s score on the Community Reinvestment Act, regulators awarded the highest possible rating to the company, which is seeking to bounce back from a series of damaging scandals.

The San Francisco-based bank recently received an “outstanding” rating in connection with its obligations to meet the credit needs of communities in which it operates, according to a government report that was released Monday. Back in 2017, the bank got a “needs to improve” rating as a result of what regulators described as egregious evidence of discriminatory and illegal credit practices.

“We are proud of the positive steps we have taken in recent years, and are pleased that the OCC noted this progress,” said Wells Fargo CEO Charlie Scharf.
“We are proud of the positive steps we have taken in recent years, and are pleased that the OCC noted this progress,” said Wells Fargo CEO Charlie Scharf.

Both reports were prepared by the Office of the Comptroller of the Currency, which has long been Wells Fargo’s main regulator. The latest report suggests a thaw in the previously strained relationship between the OCC and the nation’s fourth-largest bank six months into the tenure of CEO Charlie Scharf.

Although the OCC’s 2017 rating took into account Wells Fargo’s fake-accounts scandal, it pre-dated findings of misconduct in the bank’s mortgage and auto lending units. Wells Fargo ultimately paid $1 billion to resolve those violations. In the report released Monday, the OCC noted the more recent misconduct, but nonetheless gave the bank the top CRA rating, pointing to steps Wells Fargo has taken to remedy past misconduct.

“We considered the nature, extent and strength of the evidence of the practices; the extent to which the institution had policies and procedures in place to prevent the practices; and the extent to which the institution has taken or has committed to take corrective action, including voluntary corrective action resulting from self-assessment; and other relevant information,” the OCC’s report stated.

If it had not been for Wells Fargo’s extensive regulatory problems, the $1.95 trillion-asset bank probably would have aced its last CRA exam, too.

In the OCC’s 2017 report, the bank earned high marks on the lending test, which assesses banks’ provision of credit to borrowers with low incomes, as well as the investment test, which considers banks’ community development efforts, and the service test, which evaluates whether banks are operating branches in places where people with low incomes live.

Similarly, the report released Monday called Wells Fargo a leader in making community development loans. It said that the bank’s decisions about opening and closing branches have not hurt access by individuals with low- and moderate incomes.

Wells Fargo’s commitment to serving low- and moderate-income communities has not wavered, Scharf said Monday, even as he acknowledged that the company still has work to do to regain the trust of its customers and regulators.

“We are proud of the positive steps we have taken in recent years, and are pleased that the OCC noted this progress,” Scharf said in a press release.

Before 2017, Wells Fargo had maintained an “outstanding” rating for its overall compliance with the Community Reinvestment Act for at least 23 years.

The restoration of the bank’s lofty rating is the latest sign that its regulatory relationships have begun to improve. Last month, the Federal Reserve Board modified Wells Fargo’s asset cap so that the bank could participate in business lending programs that the U.S. government launched in response to the coronavirus crisis.

Just last year, officials at the OCC and the Fed were maneuvering behind the scenes to oust Wells Fargo’s then-CEO, Tim Sloan, according to a recent report from House Democrats.

Sloan was a longtime Wells Fargo insider who rose to the top job in 2016. Scharf, who joined Wells in October, has moved quickly to reshape the bank’s leadership team with other outside hires.

The OCC report that was released Monday covered 2012 through 2018. The report released three years ago covered 2009 to 2012, though the agency also considered more recent regulatory actions against the bank.

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CRA Wells Fargo Charles Scharf OCC
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