After years of scrutiny, fines, and federal restrictions, Wells Fargo is finally free to expand its business again. In June 2025, the Federal Reserve lifted a growth restriction that had capped the bank’s assets at $2 trillion since 2018. This move marks a significant turning point in the bank’s long and public effort to recover from one of the most damaging scandals in recent financial history.

The Scandal

The scandal at the heart of Wells Fargo’s downfall involved widespread fraud within its consumer banking division. Between 2002 and 2016, thousands of employees, under intense pressure to meet unrealistic sales goals, opened millions of unauthorized bank accounts and financial products in customers’ names without their consent or knowledge.

This misconduct included creating fake checking and savings accounts, issuing unwanted credit and debit cards, forging customer signatures and contact information, moving customer funds without permission, and using false identities to meet sales quotas. In many cases, these unauthorized accounts resulted in fees, damaged credit scores, and misuse of personal data. Top executives at Wells Fargo’s Community Bank division, which generated over half of the company’s revenue at the time, were aware of the illegal sales practices but failed to make meaningful changes.

The Fallout

The scandal became public in 2016, but warning signs were apparent much earlier. Media investigations, notably by The Wall Street Journal in 2011 and The Los Angeles Times in 2013, highlighted Wells Fargo's aggressive sales culture and the immense pressure on employees to meet unrealistic sales quotas, detailing instances of unauthorized account openings. Customer complaints also played a role as individuals noticed unexpected fees or received unsolicited cards. These factors eventually caught the attention of regulators like the Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency (OCC), and the Los Angeles City Attorney's office.

Public backlash and congressional hearings followed, forcing CEO John Stumpf to resign and return tens of millions in compensation. He was later banned from the banking industry. In the years that followed, additional investigations uncovered misconduct in other areas, such as mortgage lending and auto loans. In 2020, Wells Fargo agreed to pay $3 billion to settle both criminal and civil charges. The bank admitted to fraud, identity theft, and misusing customer information.

The Asset Cap

As part of a broader crackdown, the Federal Reserve imposed an unprecedented punishment in 2018: a cap on Wells Fargo’s total assets, limiting its size and ability to grow. The goal was to force the bank to overhaul its governance and risk management practices before allowing it to expand again. The asset cap meant Wells Fargo couldn’t grow its total holdings (e.g., no more deposits or major loan expansion). It was the first time the Federal Reserve had used this kind of restriction.

At the time, Wells Fargo held more than 10% of U.S. deposits. Today, that number is closer to 7%. The cap slowed the bank’s competitiveness and forced it to divert billions into regulatory compliance and internal reform efforts. To meet federal requirements, Wells Fargo revamped its corporate structure, enhanced oversight, and hired thousands of risk and compliance staff. The work was slow and costly, by some estimates, $2.5 billion more annually compared to 2018.

A New Era Under New Leadership

Scharf was initially replaced by Timothy Sloan in 2016, a longtime Wells Fargo executive who had previously led the bank’s wholesale banking division. Sloan was tasked with repairing the bank’s damaged reputation and overhauling its internal controls. While he took some initial steps, such as eliminating sales goals, expanding customer remediation efforts, and issuing public apologies, critics argued that his deep ties to the company’s past made it difficult for him to enact meaningful change. Under continued regulatory scrutiny and pressure from lawmakers, Sloan stepped down in 2019.

In 2019, Wells Fargo appointed Charlie Scharf as CEO, bringing in a leader with experience in turning around troubled companies. Scharf previously held top roles at JPMorgan Chase, Visa, and Bank of New York Mellon. Under his leadership, Wells Fargo made progress in fixing its broken systems. An organizational culture is formed over a long period of time and becomes embedded in the way daily activities are performed, so lasting change has required both structural and cultural shifts. According to the Federal Reserve, the bank has now completed third-party reviews of its risk and governance reforms and passed the central bank’s own assessment.

What’s Next

As of June 2025, the Fed lifted the asset cap, calling it a reflection of “substantial progress” made by the bank. However, not all regulatory restrictions are gone. Other parts of the 2018 enforcement action remain in place until further conditions are met.

With the asset cap lifted, Wells Fargo can now expand its balance sheet, grow deposits, issue more loans, and invest in its Wall Street operations. CEO Charlie Scharf called this moment a “pivotal milestone,” signaling a shift in focus from internal repair to external growth. Future plans include growing its branded credit card and wealth management offerings, expanding the corporate and investment banking divisions, increasing hiring in dealmaking and trading roles, and cutting costs by scaling back compliance staffing over time.

As a gesture to employees, the bank announced a $2,000 bonus for full-time staff following the Fed’s decision. Still, analysts caution that rebuilding trust, both internally and with the public, will be a long-term effort. The scandal remains a defining chapter in the bank’s history.

In the Classroom

This article can be used to discuss business ethics (Chapter 2: Business Ethics and Social Responsibility) and banking (Chapter 15: Money and the Financial System).

Discussion Questions

1.     How did Wells Fargo’s culture contribute to unethical sales practices?

2.     Explain the nature of the asset cap and the purpose it served.

3.     What challenges might Wells Fargo face as it shifts from internal reform to external growth?

 

This article was developed with the support of Kelsey Reddick for and under the direction of O.C. Ferrell, Linda Ferrell, and Geoff Hirt.