Federal regulators said Wells Fargo employees opened accounts in customers’ names without their consent.
The Los Angeles Times first uncovered a pervasive culture of aggressive sales goals that pushed thousands of workers to open as many as 2 million accounts that bank customers never wanted. Regulators have called it "outrageous" and "a major breach of trust."
That 2013 story caught the attention of Los Angeles City Atty. Mike Feuer, who sued the bank in May 2015.
The suit was settled this month. The bank did not admit any wrongdoing, but it apologized to customers and announced steps to change its sales practices. It will pay $100 million to the Consumer Financial Protection Bureau — the largest fine the federal agency has ever imposed — as well as $50 million to the city and county of Los Angeles and $35 million to the Office of the Comptroller of the Currency.
Wells Fargo Chief Executive John Stumpf quickly left the Rayburn House Office Building today after facing more than four hours of blistering questioning from lawmakers angry about the bank’s creation of millions of bogus accounts in customers' names.
Stumpf would not answer reporters’ questions after numerous members of the House Financial Services Committee criticized his handling of the controversy and questioned his ability to run the giant bank.
"I’m amazed at what you don’t know about your business. I’ve heard more 'I don’t knows' from a CEO than I think I ever heard in my life,” Rep. Roger Williams (R-Texas) told Stumpf. “I’ve got one simple question for you: When are you going to resign?"
At last week’s Senate Banking Committee hearing, Wells Fargo Chief Executive John Stumpf repeatedly dodged questions over whether his pay or the pay of an executive at the heart of the fake-accounts scandal should be docked.
He told senators several times that decisions about executive pay would be made by a committee within the bank’s board of directors, and that he would not make a recommendation one way or another.
But today, before members of the House Financial Services Committee, Stumpf said that he recommended that the board dock his pay. The board announced Tuesday that Stumpf would give up about $45 million in compensation – a move Stumpf now says he volunteered to make.
In his questions for Wells Fargo Chief Executive John Stumpf, Rep. Ed Perlmutter (D-Colo.) focused on an issue not particular to that bank but exemplified by its practices and its in-house terminology: Banks are focused not simply on taking deposits and making loans, but on selling “products.”
Most big banks have several products, from basic checking and savings accounts to debit cards, credit cards and retirement accounts. And most big banks want their customers to use several products -- an idea known as cross-selling.
Wells Fargo is famous for its focus on sales and for years has reported the success of its cross-selling strategy, providing quarterly figures on the number of accounts used by the average customer -- something other banks generally don’t do. In the second quarter, the bank reported that among its customers, the average retail banking household used 6.27 Wells Fargo products.
Sep. 29, 2016, 10:08 a.m.
The damage you have done to the market, to your industry, far exceeds the damage to your own business. ... Y'all were rotten.
Rep. Mick Mulvaney (R-S.C.) to Wells Fargo CEO John Stumpf
Sep. 29, 2016, 10:04 a.m.
Surely we should have realized earlier that product sales goals could elicit behavior that’s inconsistent with our culture. … It’s simply not worth it.
Wells Fargo chief executive John Stumpf said he didn’t know many of the details about how the company’s sales goals were implemented at the bank’s branches.
Rep. Keith Ellison (D-Minn.), who participated in a June forum with other lawmakers and about 40 workers from Wells Fargo and other banks, questioned Stumpf on Thursday on a variety of practices reported by those employees.
“Each banker was expected to make 100 calls a day” to drum up new business, Ellison told Stumpf.
Chief Executive John Stumpf said he was not surprised by the 2013 Los Angeles Times article that first shed light on Wells Fargo employees’ practice of opening accounts without customers’ authorization to meet sales goals.
During testimony Thursday, he said he had always been aware it was an issue, but did not know it was “becoming a bigger issue” until the summer or fall of 2013.
Stumpf said that he has “always known that not everyone will do everything right every day” and that employees needed to be monitored. In mid- or late 2013, he said he was notified there had been “an acceleration of this activity in a certain marketplace."
Like the rest of the members of the House Financial Services Committee, Rep. Steve Pearce (R-N.M.) had plenty of questions for Wells Fargo CEO John Stumpf -- and like other members, he didn't seem particularly interested in giving Stumpf a chance to answer.
Each member of the committee gets five minutes to question Stumpf, and a bit more if the committee chairman allows. During 5 minutes and 26 seconds of back and forth between Stumpf and Pearce, Stumpf spoke for just 36 seconds.
That’s about par for the course at Thursday's hearing, with committee members taking as much of their time as possible to lambaste Stumpf for failing to stop bad practices sooner, for not informing investors about fraudulent accounts before the scandal broke and for not resigning once it did.
More than half of the 60 members of the House Financial Services Committee are at the Wells Fargo hearing, an unusually high turnout given that other hearings are happening now too. Most if not all of the panel members are here to get their five minutes of ripping into Chief Executive John Stumpf. Many barely gave Stumpf a chance to respond.
Lawmakers’ comments have included:
"Something is going wrong at this bank, and you are the head of it,” said Rep. Gregory Meeks (D-N.Y.) “If the buck stops with you … then you should be fired because it stops with you."