In 2015, an OCC review of Wells Fargo’s sales practices revealed shortcomings that prompted the agency to demand changes as well as requests for the bank to compensate customers for any damages that occurred.
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The San Francisco-based bank has been in lawmakers’ crosshairs since being fined $185 million earlier this month after thousands of the bank’s employees created up to 2 million fake accounts – from credit cards to checking accounts – to meet sales goals. “And at giant banks like Wells Fargo that seems to mean cheating as many customers, investors and employees as they possibly can”. About 5,300 employees were fired for opening accounts and moving consumers’ money to them without the knowledge or consent of the customers.
FBR did not comment in its report on whether Stumpf should go. Under Stumpf’s watch, the bank will pay a record $185 million fine after employees opened more than two million unauthorized accounts, passing off nearly $2.5 million in fees to legitimate customers. Tolstedt retired with $125 million previous stock compensation, but she did not receive a severance, Stumpf testified.
Some senators suggested that aggressive sales goals at Wells Fargo – and incentive payments for reaching them – were contributing factors in the scandal. He said no one directed them to create unwanted accounts.
“Gutless leadership”, she declared, going on to eviscerate the bank’s policy of “cross selling”, which encourages customers to open and hold numerous accounts.
Until Tuesday, the bank had said only that Ms. Tolstedt retired.
In answer to a question, he declined to commit to setting aside mandatory arbitration agreements that prohibit clients from suing Wells Fargo. But the questioning was often tense, and Stumpf was interrupted and chastised by lawmakers for not catching the problem sooner.
“I accept full responsibility for all unethical sales practices in our retail banking business, and I am fully committed to doing everything possible to fix this issue, strengthen our culture, and take the necessary actions to restore our customers’ trust”, according to the prepared testimony.
The revelations are a severe hit to Wells Fargo’s reputation.
“Have you returned one nickel of the money that you earned while this scandal was going on?”
Pressed by Warren, Stumpf acknowledged that Wells Fargo had not fired any senior executives for the behavior. And criminal investigations matter. Several senators read letters they had received from their constituents who had been former Wells Fargo employees, complaining of pressure to keep signing up new accounts and constantly fearing the threat of being fired for not meeting quota.
She then said that “Your definition of accountability is to push this on your low-level employees”. Stumpf’s answer: “That is a very good question”.
Brown pressed Stumpf on whether the company would use its authority to take back bonuses for Tolstedt and others, and Stumpf said he would take it into consideration. Tolstedt opted to retire in July.
For Jaret Seiberg, analyst at Cowen Washington Research Group, the hearing reinforced his assertion that the market under-appreciates the risk that Congress over the next few years may take steps to restructure or break up the biggest banks.
Senate Banking Committee member Sen. Jon Tester told Stumpf. Warren also said Stumpf made millions of dollars in the “scam”, telling him, “You should resign. and you should be criminally investigated”.
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Warren criticized Stumpf for pushing the blame to lower-level employees.
