Pressures mount on Wells Fargo following fake-accounts scandal
Federal regulators said Wells Fargo employees opened accounts in customers’ names without their consent.
Pressure mounted on Wells Fargo & Co. Friday following its fake-accounts scandal, as the bank faced new calls to allow affected customers to file lawsuits and for the board of directors to rescind the pay of a key senior executive.
The demands came just one day after Chief Executive John Stumpf resigned from a Federal Reserve advisory panel.
Senators had pushed for Stumpf not to be reappointed, saying it was inappropriate for someone who presided over improper sales tactics to be giving advice to an agency involved with bank regulation.
Stumpf has been under intense fire since the bank this month agreed to pay $185 million to settle investigations by Los Angeles City Atty. Mike Feuer, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency into an aggressive sales culture that led bank employees to open as many as 2 million accounts that customers didn’t authorize.
The Justice Department is investigating possible criminal charges, and some senators have called for a Labor Department investigation into whether the bank failed to pay employees overtime when they worked late nights and weekend to meet sales quotas.
A group of Senate Democrats continued to attack Wells Fargo on Friday, publicly calling on Stumpf to stop enforcing mandatory arbitration clauses in the agreements for customer accounts that were not authorized.
Sen. Sherrod Brown (D-Ohio) had pressed Stumpf on the matter at a Senate Banking, Housing and Urban Affairs Committee hearing Tuesday, arguing that it was unfair not to allow those customers the ability to file lawsuits against the bank.
Stumpf said at the time that he would have to “talk to my legal team.”
Brown said Friday that he and his colleagues want relief for bank customers and more answers from Wells Fargo.
“If Wells Fargo really does want to look out for the customers, if they really are in fact sorry, as the CEO said, for these unauthorized accounts, they ought to let the court system work if these people who were wronged want to bring suit,” he said.
The Democrats sent a letter to Stumpf on Friday, requesting more information about the arbitration clauses, including how many customer complaints about fake accounts were forced into arbitration proceedings.
Brown was among those writing to Stumpf, along with Patrick Leahy of Vermont, Richard Durbin of Illinois, Richard Blumenthal of Connecticut, Al Franken of Minnesota and Elizabeth Warren of Massachusetts.
A spokeswoman for Wells Fargo did not immediately respond to a request for comment.
Also on Friday, an activist investment group that is part of the Change to Win union federation wrote to Wells Fargo’s board, asking it to rescind at least part of the compensation earned by the executive who oversaw the employees who opened unauthorized customer accounts.
The letter from CtW Investment Group, which is a Wells Fargo shareholder, adds to the pressure on the bank to claw back some of the approximately $100 million earned by Carrie Tolstedt, the company’s former head of community banking.
Wells Fargo’s stock has declined by about 8% since the settlement was announced on Sept. 8.
On Thursday, five senators called for Stumpf not to be reappointed to the Federal Advisory Council, a 12-member body that meets four times a year with the Fed’s Board of Governors to discuss banking and economic matters.
Stumpf had represented the Fed’s San Francisco district, where Wells Fargo is based, since 2015.
He “made a personal decision to resign” and notified the Fed on Thursday, Wells Fargo spokeswoman Jennifer Dunn said.
“His top priority is leading Wells Fargo,” she said.
Sen. Angus King, an independent from Maine, organized the letter to the head of the board of directors of the Federal Reserve Bank of San Francisco asking that Stump not be reappointed to the advisory council when his term expires on Dec. 31.
“It would be ironic if the Federal Reserve, a key federal banking regulator tasked in part with ensuring the fair and equitable treatment of consumers in financial transactions, continued to receive special insights and recommendations from senior management of a financial institution that just paid a record-breaking fine to the Consumer Financial Protection Bureau for ‘unfair’ and ‘abusive’ practices that placed consumers at financial risk,” they wrote.
The letter also was signed by Warren and Democratic Sens. Maria Cantwell of Washington and Jeff Merkley and Ron Wyden, both of Oregon.
Their call was backed by Fed Up, a coalition of labor, community and liberal activist groups that has pushed to reduce the influence of bankers on Federal Reserve policies.
“Commercial banks already have too much influence within the Federal Reserve System,” the coalition said Thursday. The coalition also asked its members to sign a petition calling for Stump’s “immediate dismissal” from the advisory panel.
“Stumpf, as the CEO of a bank accused of ‘unfair’ and ‘abusive’ practices, should have no role advising the Federal Reserve’s Board of Governors on policies affecting working families,” Fed Up said.
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12:35 p.m.: This article has been updated with comments from Sen. Sherrod Brown.
11:05 a.m.: This article has been revised throughout and updated with information about a letter from Senate Democrats asking Wells Fargo to stop enforcing mandatory arbitration clauses in the agreements for customer accounts that were not authorized.
10:15 a.m.: This article has been updated with information about a request to reduce the compensation of Carrie Tolstedt, Wells Fargo’s former head of community banking.
This article was originally published at 9:50 a.m.