UPDATE: Wells Fargo Settles Allegations with Federal Reserve Regarding Former Business Unit

Wells Fargo & Company WFC announced today an agreement with the Board of Governors of the Federal Reserve that resolves allegations arising from an investigation into internal controls at its former Wells Fargo Financial unit. The Federal Reserve alleged that Wells Fargo Financial did not adequately detect and prevent instances of fraudulent loan applications and directing of prime borrowers into higher-cost nonprime loans. As part of the agreement, Wells Fargo & Company is reinforcing oversight of mortgage lending practices and implementing processes that will identify and provide compensation to customers harmed by the alleged practices The Company's agreement with the Federal Reserve does not include an admission of the allegations cited, which cover lending practices at Wells Fargo Financial between January 2004 and September 2008. The agreement notes Wells Fargo Financial identified instances in which sales personnel altered income documents to inflate prospective borrowers' incomes, so the customers could qualify for loans they may not have otherwise been eligible to receive. Before and during the Federal Reserve's investigation, Wells Fargo voluntarily provided restitution, such as reduced interest rates and cash refunds, to approximately 600 Wells Fargo Financial customers pursuant to its own internal investigation. Wells Fargo Financial also terminated the individuals involved.