Wells Fargo & Co. said Tuesday that it would eliminate all sales goals for credit cards, checking accounts and other retail banking products as the financial giant tries to repair its image following a $185-million settlement over aggressive sales tactics.
The announcement by Chief Executive John Stumpf came as the Senate Banking Committee said Monday that it would hold a hearing next week on Wells Fargo’s sales practices, which pushed thousands of employees to open as many as 2 million accounts without customers’ authorization.
Stumpf, who will testify at the Sept. 20 hearing, said he was sorry about the scandal.
“We deeply regret any situation where a customer got a product they didn’t request,” Stumpf said during an appearance on CNBC’s “Mad Money” on Tuesday.
He said he was fully accountable for the problems but does not plan to resign.
In statement earlier Tuesday, Stumpf said that the company has “significantly strengthened our training programs, controls and oversight.”
“The elimination of product sales goals represents another step to reinforce our service culture, helps ensure that nothing gets in the way of our ability to achieve our mission and is consistent with our commitment to providing a great place to work,” he said.
The sales goals will be eliminated starting Jan. 1, Wells Fargo said.
Another top Wells Fargo executive said Tuesday that the workers involved in the aggressive sales were lower-level employees and the practices were not designed to increase the bank’s revenue.
“The people who we’re talking about here weren’t the high performers,” Chief Financial Officer John Shrewsberry said at the Barclays Global Financial Services Conference in New York City. “It was really more at the lower end of the performance scale, where people apparently were making bad choices to hang on in their job.”
Wells Fargo has fired about 5,300 people for improper sales practices since 2011, according to the Consumer Financial Protection Bureau, which imposed a $100-million fine as part of the settlement.
Shrewsberry said the bank had invested $50 million to improve its monitoring of employees’ activities, including adding a “mystery shopper program” to identify improper sales tactics.
Also Tuesday, U.S. Treasury Secretary Jacob J. Lew called Wells Fargo’s sales practices “bad behavior” and showed the need for tough oversight of banks and other financial firms.
“The pattern of behavior that we’ve seen here is something that needs to stop,” he said during an appearance at a different New York City conference. “It is not acceptable to do things that are designed to increase either individual or firm bottom lines by deceiving customers or passing along charges that are either invisible or they don’t know about.”
Lew said regulators were “correct to take action” against Wells Fargo. And while declining to comment further on the specifics of the case, he said it highlighted the need for the strong regulations put in place by the 2010 Dodd-Frank financial reform law.
The Consumer Financial Protection Bureau was created by that legislation and has been under attack by congressional Republicans ever since. They have accused the CFPB of being too powerful and restricting consumers’ access to credit. GOP-backed legislation that would reduce the agency’s authority and overhaul Dodd-Frank passed the House Financial Services Committee on Tuesday.
“This ought to be a moment when people stop and remember how dangerous the system is when you don’t have the proper protections in place,” Lew said at the Delivering Alpha conference, hosted by CNBC and Institutional Investor magazine.
“This is a wake-up call. It should remind all of us and firms that culture and compensation make a difference,” he said. “How you reward people, how you motivate people and what values you hold people to matter.”
The sales tactics, which left customers with unwanted credit cards and checking and savings accounts, were first uncovered by the Los Angeles Times in 2013 and triggered investigations by local and federal regulators that led to the settlement last week.
Last year, Los Angeles City Atty. Mike Feuer sued Wells Fargo, alleging the bank “victimized their customers by using pernicious and often illegal sales tactics,” such as unrealistic quotas.
The CFPB and the Office of the Comptroller of the Currency also opened investigations and found that bank employees illegally transferred money from legitimate accounts into unauthorized ones opened for customers without their approval.
Wells Fargo did not admit any wrongdoing in the settlements.
On Friday, Wells Fargo sent an alert to some of its employees requesting that they temporarily suspend the practice of trying to sell customers other products — known as cross-selling — because of high call volumes. The practice has been cited as a key factor leading to the unwanted customer accounts.
But the bank is not halting the practice, said spokeswoman Jennifer Langan. Because of anticipated call-volume increases that are typical after Labor Day — and the expected settlement news, which also would generate additional inquiries — the roughly 10,000 workers at the bank’s telephone contact centers were instructed to try to process customer requests as quickly as possible.
The suspension, which does not apply to workers in bank branches, will be reviewed after this week’s call volumes are assessed, she said.
Shrewsberry said Tuesday that cross-selling remained part of the bank’s “approach to satisfying all of our customers' financial needs.”
Wells Fargo executives were scheduled to brief Senate Banking Committee staff on Tuesday, with regulators making presentations later in the week in preparation for the hearing, according to a committee aide.
“We are prepared to provide the committee with information on this matter and to discuss steps we have taken to affirm our commitment to customers,” Wells Fargo said Tuesday.
Shares of Wells Fargo closed down 3.26% to $46.96 on Tuesday, and were off 5.6% since the announcement of the settlement agreement last week.
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3:40 p.m.: This article was updated with comments from Wells Fargo Chief Executive John Stumpf and to note that he will testify at the Sept. 20 Senate hearing.
1:35 p.m.: This article was updated with Wells Fargo comment on the Senate Banking Committee hearing and the final stock price.
10:25 a.m.: This article was updated with comments from Wells Fargo Chief Financial Officer John Shrewsberry, information on a suspension of cross-selling and additional details on the Senate hearing.
9 a.m.: This article was updated to note that sales goals will be eliminated starting Jan. 1.
8:49 a.m.: This article was updated with Wells Fargo’s stock price.
This article was originally published at 7:20 a.m.