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Sen. Warren flags Wells Fargo's 'gross mismanagement' of forbearance to Fed

Written by Jasir Jawaid

Sen. Elizabeth Warren, D-Mass., said in a letter to Federal Reserve Chairman Jerome Powell that the Fed should consider Wells Fargo & Co.'s practice of involuntarily placing borrowers into forbearance before lifting its growth restriction.

News outlets reported in July that the company placed borrowers in at least 14 states into forbearance without their knowledge or consent, many of whom were not delinquent on their mortgages.

After the report came to light, Warren, who is a member of the Senate Banking Committee, sent a letter to Wells Fargo requesting additional information on the bank's forbearance policy. While the bank did admit to entering certain customers into forbearance without their consent, it did not identify how many total customers were affected.

However, the bank did inform Warren's office that by Aug. 12 it had received over 1,600 customer complaints about forbearance practices. Also, an internal review showed that at least 904 accounts held by customers in active bankruptcy proceedings were placed into forbearance without an affirmative request, one-fifth of which were current on

their mortgage payments, according to Warren.

Wells Fargo also described efforts to contact customers who had been placed into forbearance without their consent, but it still indicated that it was unable to contact or obtain clarity on whether consumers wanted forbearance for over 20% of the affected consumers in bankruptcy proceedings.

"This recent incident is another stark reminder that Wells Fargo has not yet implemented the types of structural reforms needed, and that much additional progress is necessary before the Fed begins to consider permanently lifting the asset cap," Warren said.

This article was published by S&P Global Market Intelligence on the S&P Capital IQ Pro platform.


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