By Laura J. Keller
(Bloomberg) --Wells Fargo & Co., reeling from a scandal over fake accounts that erupted in September, said it’s wrapping up an expanded review of that issue, while facing new probes and higher potential legal costs.
The bank must “go beyond what has been asked of us by our regulators by reviewing all of our operations -- leaving no stone unturned -- so we can be confident we have done all that we can do to build a better, stronger Wells Fargo,” Chief Executive Officer Tim Sloan said in a statement Friday.
The Consumer Financial Protection Bureau is looking at whether consumers were “unduly harmed” by the bank freezing and closing accounts that had suspected fraudulent activity, the San Francisco-based bank said Friday in a regulatory filing. Wells Fargo also said in the filing that issues in its auto lending business may spark investigations, even beyond the practice of forcing unwanted insurance onto customers that the company disclosed last month.
The expansion of its fake-accounts review to include three more years and a new methodology in finding affected customers will probably lead to a “significant increase” in cases, the bank said. The lender aims to have its consultant complete the review by the end of this quarter and doesn’t expect the incremental costs from reimbursing more customers to have a major financial impact.
Shares of the lender dropped 1.7 percent to $52.52 at 3:30 p.m. in New York, reversing an earlier increase. That was the biggest decline in the 24-company KBW Bank Index.
Legal Costs
Separately, the company said it self-disclosed instances where foreign banks used “a Wells Fargo software-based solution” to finance trade involving nations prohibited by the Office of Foreign Assets Control. Wells Fargo is cooperating with a Department of Justice inquiry on the matter, it said.
The bank’s “reasonably possible” legal charges could surpass its reserves by $3.3 billion as of June 30, up from an estimate of $2 billion at the end of March, according to the filing.
The board of directors is reviewing its own “structure, composition and practices,” which will lead to actions announced later this quarter, Sloan said.
To contact the reporter on this story: Laura J. Keller in New York at [email protected] To contact the editors responsible for this story: Michael J. Moore at [email protected] Steven Crabill
