During a Senate Banking Committee hearing today, senators of both parties challenged Wells Fargo Chairman and CEO John Stumpf over the recent enforcement action against the bank for unauthorized deposit and credit card accounts created by Wells Fargo employees to meet sales goals. During his appearance, Stumpf apologized for “wrongful sales practice behavior in our retail banking business” that is “against everything we stand for as a company.”
Stumpf announced new initiatives in response to the scandal, which resulted in the firing of 5,300 employees in recent years. “We will end product sales goals for everyone in our retail banking business,” he said. “We want to make sure nothing gets in the way of doing what is right for our customers.” He also said the company would extend the scope of its investigation to 2009 and 2010 and that it had implemented a new procedure of sending a confirmation email to customers when a new deposit account is opened and an acknowledgement letter after a customer applies for a credit card.
Stumpf insisted that the goal of Wells Fargo’s cross-selling program, and associated product sales goals, was to serve customers. “The goal here is not products; the goal here is deep relationships,” he said. “We had the wrong tool in place to make that happen… We should have realized much sooner that the best way to solve the problems in the retail banking business was to completely eliminate retail banking product sales goals.”
ABA President and CEO Rob Nichols said dishonest practices have no place in banking, which relies fundamentally on trust. “We strongly condemn any kind of dishonest or unethical behavior at any bank at any time. Preserving customer trust is a bank’s paramount duty.”
“It’s important to remember that there are more than two million women and men working for America’s banks who proudly focus every day on meeting the needs of their customers,” he added. “This should not cast a shadow over their work, which helps communities and the economy grow.”
With Wells Fargo’s product sales quotas in the regulatory cross-hairs, Comptroller of the Currency Thomas Curry warned that large and midsize banks should expect closer examiner scrutiny of sales practices. “The actions against Wells Fargo highlight that we must continue our efforts to improve and refine the agency’s supervisory program, to sharpen our early warning processes, and to enhance our supervisory capabilities, particularly with respect to our largest, most complex banks,” Curry told the committee during the hearing. “At the same time, I have directed our examiners to review the sales practices of all the large and midsize banks the OCC supervises and assess the sufficiency of controls with respect to these practices.”
During the hearing, senators raised questions about the timeline of when Wells Fargo first reported the problems with unauthorized accounts to regulators. Stumpf said that he first became aware of the problems in late 2013, prior to which they were being handled by the compliance and audit functions within Wells Fargo’s retail banking unit.
Curry noted that the OCC first received consumer and employee complaints in 2012, and Consumer Financial Protection Bureau Director Richard Cordray said that the CFPB learned about the problem through tips in mid-2013. “We had known about these types of problems from our sources, but if any institution feels they can divide and conquer the regulators, they should know that that is a mistake,” Cordray added, urging financial institutions to self-report known issues promptly to all relevant regulatory agencies.