UPDATE 3-Wells Fargo dismisses consumer lending head Codel

(Adds details about Codel's dismissal and his direct reports)

NEW YORK/WASHINGTON Nov 17 (Reuters) - Wells Fargo & Co has fired its head of consumer lending over unsuitable communications he had with a former employee, the bank said on Friday, the latest upheaval at a lender roiled by scandal for more than a year.

Franklin Codel, a member of the bank's management committee, acted in a manner that was contrary to internal policies and expectations of senior leaders, Wells Fargo said in a statement. The bank expects to appoint a permanent successor by the end of the year.

The dismissal was not due to any failures within the consumer lending business, nor was it related to a long-running sales practices scandal, Wells Fargo said.

In fact, Codel was a key executive trying to clean up the mess left behind by the scandal. Promoted to the role just over a year ago, he was overseeing efforts to fix problems related to auto lending and mortgages that Wells Fargo unveiled in August.

Wells, the third-largest U.S. bank, has been mired in scandal since September 2016 after reaching a regulatory settlement over its opening perhaps millions of accounts without customers' knowledge to meet sales targets. Since then, it has faced more lawsuits and probes, and the number of potentially affected customers has grown to 3.5 million.

In auto lending, Wells has said more than 800,000 borrowers may have been charged for auto insurance they did not need. It also found other customers were likely enrolled in mortgage rate locks and add-on products they did not want.

The bank's shares were down 1 percent at $54.03 in morning trading.

Wells Fargo did not detail how exactly Codel's communications breached policies and expectations.

Sources familiar with his departure described Codel as an ethical person who had a careless interaction in recent weeks over dismissal and compensation with a former underling he had fired. The former employee alerted management to the tone of the interaction recently and Codel was swiftly fired, said the sources, who requested anonymity to discuss sensitive nonpublic information.

Wells Fargo Chief Executive Tim Sloan described it as a "difficult" situation in the company statement. He will be the boss of Codel's direct reports until a replacement is found.

Those reports include Michael DeVito, interim head of Wells Fargo Home Lending; Laura Schupbach, head of Wells Fargo Dealer Services; John Rasmussen, head of Personal Lending; and Laurie Nordquist, head of Personal and Small Business Insurance. (Reporting by Dan Freed in New York and Patrick Rucker in Washington; Additional reporting by Nikhil Subba in Bengaluru; Writing by Lauren Tara LaCapra; Editing by Meredith Mazzilli)