CCRcorp Sites  

The CCRcorp Network unlocks access to a world of insights, research, guides and information in a range of specialty areas.

Our Sites

TheCorporateCounsel

TheCorporateCounsel.net

A basis for research and practical guidance focusing on federal securities laws, compliance & corporate governance.

DealLawyers

DealLawyers.com

An educational service that provides practical guidance on legal issues involving public and private mergers & acquisitions, joint ventures, private equity – and much more.

CompensationStandards

CompensationStandards.com

The “one stop” resource for information about responsible executive compensation practices & disclosure.

Section16.net

Section16.net

Widely recognized as the premier online research platform providing practical guidance on issues involving Section 16 of the Securities Exchange Act of 1934 and all of its related rules.

PracticalESG

PracticalESG.com

Keeping you in-the-know on environmental, social and governance developments

Last week I wrote that FTX’s collapse was a clear example that corporate governance “is not some ethereal, generalized concept or administrative burden. It is (or should be) a set of concrete operating and oversight processes with real responsibilities and accountability.” Yesterday we saw yet another example of how important this is – the Consumer Financial Protection Bureau (CFPB) ordered already-beleaguered Wells Fargo Bank

“… to pay more than $2 billion in redress to consumers and a $1.7 billion civil penalty for legal violations across several of its largest product lines. The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes. Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank. Wells Fargo also charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts.” 

If that wasn’t enough, a new Bloomberg report claimed

“… the San Francisco-based lender underwrote 42% fewer mortgages to Black buyers than in the year it announced its target, a Bloomberg News analysis of data covering more than 50 million mortgages over the past 15 years found. Even counting mortgages purchased from other lenders, Wells Fargo has backed successively fewer loans in each of the past five years, hitting a 15-year low in 2021.”

To be fair:

  • Wells-Fargo stated their internal data “show the bank has backed more mortgages than the Bloomberg analysis; 
  • JPMorgan “has made only modest progress toward its goal” for increasing the number of mortgages to Black buyers; 
  • Bank of America “almost doubled the number of mortgages it underwrote for Black buyers since 2017, but its lending to that group remains less than one-fifth of what it was in 2007.”

And there are other forces at work:

“… increased capital requirements that reduce their capacity to lend, … regulations introduced after the financial crisis, … the billions of dollars in fines they paid for sloppy underwriting practices and … wider social problems that result in lower incomes and credit scores in Black communities… Nonbank lenders [such as Rocket Companies], which face fewer restrictions account for a larger share of the market, especially for low-income buyers.” 

But even with certain realities arguably outside the banks’ control, this isn’t a good look. One thing that could have been helpful is if the banks improved communications to the public and media about business changes made in response to external developments impacting their ability to meet ESG commitments. Part of that means considering ESG commitments important enough to give that kind of attention – and understanding the risk of not meeting those promises/goals. That is one component of real corporate governance that reflects and acknowledges business risks.

Back to all blogs

The Editor

Lawrence Heim has been practicing in the field of ESG management for more than 35 years. He began his career as a legal assistant in the Environmental Practice of Vinson & Elkins working for a partner who is nationally recognized and an adjunct professor of environmental law at the University of Texas Law School. He moved into technical environmental consulting with ENSR Consulting & Engineering at the height of regulatory development, working across a range of disciplines. He was one… View Profile