But in a statement, it said it is “prepared to provide the committee with information and to discuss steps we have taken to affirm our commitment to customers”.
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The bank said it has fired 5,300 people over the matter and would eliminate sales goals in its retail banking on January 1, 2017. The Senate Banking Committee has summoned John Stumpf, chief executive of Wells Fargo & Co., to testify about the bank’s alleged sales-practices misdeeds after it agreed last week to pay a $185 million fine and enter into an enforcement action with regulators.
Wells Fargo declined to comment on the suit which was filed Friday in U.S. District Court in Utah.
Given the scope of the scam-employees opened millions of unauthorized accounts-and disparity of punishment-5,300 low level employees were fired while the executives who oversaw the fraud were awarded massive bonuses-respondents had rich fodder for the lawmakers, which they shared with the hashtag #StumpStumpf. The CFPB’s order serves as a wake-up call to the banking industry to carefully monitor its sales practices and incentive compensation programs.
Since the announcement of the fines against the bank, the FBI and federal prosecutors have opened an investigation, a U.S. House of Representatives committee has said it’s launching an investigation and the Senate has scheduled a hearing for Tuesday.
The top regulator’s remarks come as some critics are raising questions about the roles of regulatory agencies, including why it took several years to catch the problematic behavior at Wells Fargo. Once someone opens a basic savings or checking account, the goal for banks is to get that customer to sign up for even more, whether that’s a credit card or a mortgage or a retirement account. Of Bank of America customers, 31 percent said they felt overly pressured for products they didn’t want or need. This low profile policy is now backfiring, as the bank is now facing a severe reaction from Washington over the fake accounts issue.
But Stumpf should remain CEO, Mayo says, citing certain financial performance measurements on which Mayo said Wells has outperformed peers under Stumpf, who’s been CEO since 2007. That is particularly true, he said “with respect to our largest, most complex banks”. Another benefit for the industry is that having several products with a bank makes it more hard for customers to leave and switch to a new one, said Bob Hedges, a banking industry consultant with A.T. Kearney.
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Some former employees say the explanation is simple: Wells has continued to push the sales goals that caused employees to break the rules in the first place. Its employees, encouraged by wildly unrealistic sales goals, created more than two million fake bank and credit cards.
