-WSJ@ (Adds background on Duke)
Aug 10 (Reuters) - Betsy Duke, a former Federal Reserve official and community banker from Virginia, is likely to become chairwoman of the board of Wells Fargo & Co, the Wall Street Journal reported on Thursday.
Investors have agitated for new leadership at the bank's board, as the third largest U.S. lender confronts a sales scandal that has grown beyond millions of unauthorized accounts to harm additional depositors and borrowers.
A spokesman for San Francisco-based Wells Fargo declined to comment.
Duke became a director in 2015. She was named vice chair last year after the scandal broke and then-Chairman and Chief Executive Officer John Stumpf resigned.
The Journal reported on Thursday that Stephen Sanger, who took over as chairman in October, will step down by early September, with Duke likely to take over as chairwoman.
Sanger faced a tough shareholder vote this year over the board's stewardship of the company, and has faced calls to step down from some investors.
In recent weeks, investors had told Reuters they wanted Duke to become chairwoman, citing her regulatory and banking experience.
Duke spent more than three decades as a community banker in Virginia and was a Federal Reserve governor during the 2007-2009 financial crisis. At the Fed, she was a fierce advocate for community banks affected by post-crisis regulations, according to a former colleague there.
Because she comes from small-town lenders rather than large Wall Street institutions, Duke has the bona fides of the earnest Main Street banker Wells Fargo had fashioned its image around before the sales scandal erupted, investors, analysts, colleagues and associates told Reuters.
Duke "has put a lot of leadership and effort into helping us manage a variety of regulatory reform implementations," Wells Fargo Chief Financial Officer John Shrewsberry told Reuters in an interview last month, adding that she has become "more heavily involved" in those reforms.
Last Friday, Wells Fargo said it would pay the U.S. government $108 million to settle allegations that it charged military veterans hidden fees to refinance mortgages.
The scandal erupted last September when it came to light that bank staff had opened accounts for up to 2.1 million customers without their knowledge.
Recently, Wells Fargo admitted it may have charged as many as 570,000 auto borrowers for insurance they did not want, potentially leading to 20,000 wrongful repossessions.
In its latest quarterly financial report last Friday, the bank said it was examining whether it had caused unnecessary financial harm to customers through mortgage fees, frozen deposit accounts and "add-on" products like identity theft protection. (Reporting by Dan Freed in New York; Additional reporting by Aparajita Saxena in Bengaluru; Writing by Lauren Tara LaCapra; Editing by Sai Sachin Ravikumar and Jonathan Oatis)