Wells Fargo’s CEO is expected to be grilled on Tuesday by USA lawmakers on allegations the bank’s employees secretly opened accounts over a five-year period in order to meet sales goals.
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After settling with regulators for $185 million over signing up its customers for more than 2 million accounts without their knowledge and subsequently charging them fees, Wells Fargo became the focus of a Senate Banking Committee hearing on Capitol Hill on Tuesday. Stumpf says he is “deeply sorry” that the bank failed to fulfill its responsibility to customers.
Surveys done a year ago by consulting firm cg42 showed that roughly 40 percent of Wells Fargo customers asked said their No. 1 complaint was employees’ constant pushing of products the customers did not need or want. The San Francisco-based bank agreed to pay the fines to resolve claims employees opened more than 2 million deposit and credit card accounts that may not have been authorized by consumers. The fine has also led to calls for Stumpf’s resignation, a reduction in his compensation and a “claw back” of pay for Wells Fargo’s retiring head of its community banking unit.
In this Monday, Dec. 7, 2015, file photo, Wells Fargo chairman & CEO John Stumpf is interviewed by Maria Bartiromo during her “Mornings with Maria Bartiromo” program on the Fox Business Network, in NY.
Wells Fargo executives, including Chief Executive John Stumpf, have denied that the misdeeds were the result of a flawed incentive structure or an aggressive sales culture. 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.
“Wells Fargo has strong recoupment and clawback policies in place” in part to discourage its senior executives from taking “imprudent or excessive risks that would adversely affect the Company”, the bank said in its latest proxy statement.
Ruth Landaverde, a former worker at both Wells Fargo and Bank of America, said the pressure was intense at Wells and at BofA.
Not only is the House Financial Services Committee set to hold a hearing later this month, but the powerful committee has already launched an investigation and has requested documents and executive interviews related to Wells Fargo’s sales tactics.
“Where were they? They should have been raising some red flags on these issues and they should have seen it and warned the board of directors and management much sooner”, he said.
Combine those investigations with the Senate inquiry, plus the original discipline from the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, and it shows that the banking business is nowhere close to being out of the crosshairs yet. She retired effective July 31. That makes him one of the top-paid bankers in the United States, and there are calls for him to also get the boot along with the 5,300 employees who were fired for the scandal over several years.
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Members of the panel are expected to quiz regulators on why Wells Fargo’s practices went on for years without being stopped.
