Regulators on September 8 fined Wells Fargo $185 million for opening some two million customer deposit and credit card accounts without customer approval.
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The same day, three Utah residents filed what is believed to be the first class-action lawsuit brought by customers against Wells Fargo over the allegations.
The bank sales staff had a goal of getting each customer to have eight different accounts with the bank – up from the prevailing average of six.
Elizabeth Warren on Tuesday gave a thorough tongue-lashing to Wells Fargo CEO John Stumpf for what she described as “gutless leadership” for his failure to take responsibility for the recently exposed, years-long banking fraud scandal. She repeated the question, and Stumpf told her she could find her answer in the bank’s public filing.
Debit cards were issued and activated, as well as PINs created, without customers knowing, United States and California regulators said as they fined San Francisco-based Wells Fargo a combined $185 million earlier this month. In an open letter to Wells Fargo customers, she said the bank betrayed them and that “there is no place for this kind of outrageous behavior in America”.
The wide sweep of the strong-arm sales practices within the bank, which went on for years, has drawn attention from committees in both the Senate and House.
Louisiana Senator David Vitter pressed the CEO on how customer fraud could persist for years and thousands of employees could be fired before the head of the bank got involved.
Wells Fargo has acknowledged bank employees “inappropriately opened” the customer accounts and that about 5,300 employees were fired over five years.
Stumpf sat largely stone-faced as an indignant Warren ripped into the executive, telling him that he set the target for bank employees to open eight accounts per customer, a target some experts has said is unrealistic. Though chairman of the board, Stumpf said he is not part of that discussion, which is being handed by a compensation committee.
The panel also plans to question regulators from the Consumer Financial Protection Bureau, the Treasury Department’s Office of the Controller of the Currency and the Los Angeles City Attorney’s Office.
Warren: [Business as usual] at giant banks like Wells Fargo seems to mean cheat as many customers, investors, and employees as the bank possibly can. Mr. Stumpf has repeatedly said he is accountable, yet, he has not resigned and has not returned any of the money the bank made with the fake accounts.
The House of Representative’s Financial Services Committee opened an investigation into the bank’s alleged misconduct as well as “the role of Washington regulators in monitoring and investigating” the alleged misconduct.
Wells Fargo has announced that it will eliminate its sales objectives as of January 1. Sherrod Brown (D-Ohio).
Jaret Seiberg, an analyst at Cowen & Company, said Stumpf’s testimony is unlikely to satisfy either Democrats or Republicans. “And in all 12 of these calls, you personally cited Wells Fargo’s success at cross-selling retail accounts as one of the main reasons to buy more stock in the company”.
Under fire, Stumpf said he has told his managers to do “whatever it takes” to make customers whole, refunding fees or compensating them for damage to their credit ratings.
“It’s not a square deal when the people that are fired are the tellers who make 15 bucks (an hour), and the senior execs walk off with $100 million”, said Sen.
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The bank also will pay a $35 million penalty to the Office of the Comptroller of the Currency and another $50 million to the City and County of Los Angeles, where numerous problems were found. They made clear they think the board, which has known about the bank’s “cross-selling” problems since 2013, should have acted more quickly to clean up the mess-especially on deciding whether to claw back compensation from top executives.
