Banking

House Of Reps Wants At Wells Fargo CEO John Stumpf Over Fake Accounts

Wells Fargo Chief Executive John Stumpf’s job could be in trouble due to the fake accounts scandal that is plaguing the company.

According to a Fox Business report, sources close to Stumpf said his job may be in jeopardy because of the widespread use of fake accounts to meet sales goals at Wells Fargo.

The Consumer Financial Protection Bureau fined Wells Fargo $185 million last week, the largest fine levied from the government agency. It also ordered Wells Fargo to refund $5 million in fees that the bank wrongly charged customers. According to an investigation by the CFPB, Wells Fargo employees not only made fake deposit accounts but also submitted 565,443 unauthorized credit card account applications on behalf of unknowing customers. It’s estimated that 14,000 of those accounts accrued $403,145 in fees. Through its own independent investigation, the bank discovered a total of $2.6 million in unauthorized fees.

The news about Stumpf’s job came on a day (Sept. 16) when Stumpf and other executives felt the heat from regulators and politicians. In addition to a U.S. Senate hearing next week, a report by Bloomberg said the House Financial Services Committee is also planning on investigating the Wells Fargo fake account scandal and plans to interview Carrie Tolstedt, the former community banking head, and Stumpf, who is also the bank’s chairman. The hearing will take place later in September.

The House Financial Services Committee has already requested internal documents related to the timing and discovery of the fake customer accounts. Other executives that will be called to appear for transcribed interviews include Chief Financial Officer John Shrewsberry and Chief Operating Officer Tim Sloan. Subpoenas could be considered as well.

“The committee is very concerned by these serious allegations and is investigating Wells Fargo’s questionable sales practices and corresponding agreements with federal regulators in order to evaluate the application, administration, execution and effectiveness of federal laws,” Chairman Rep. Jeb Hensarling (R-TX) said in a separate letter addressed to the lender, according to the report.

The report went on to quote the panel’s top Democrat, Rep. Maxine Waters (D-CA), as saying Stumpf took full responsibility for what went down and expressed regret. “We need to know if this sort of conduct is a systemic issue,” Waters said. “I know Mr. Stumpf very well. We talk from time to time.”

Wells Fargo may have been telling employees not to make fake accounts as early as mid-2014, but at the same time, the bank still had sales goals in place that created a culture where employees continued to create bogus accounts.

That’s according to a report by The New York Times, which cited former employees as saying the reason they continued to break the rules was because Wells Fargo continued to push the sales goals. What’s more, the paper reported that those sales goals, which got the bank in trouble, won’t be phased out for another three months.

“They warned us about this type of behavior and said, ‘You must report it,’ but the reality was people had to meet their goals,” said Khalid Taha, a former Wells Fargo personal banker who resigned in July, in the report. “They needed a paycheck.”

While Wells Fargo contends the practice had been declining since 2013, former employees told NYT the fact that fake accounts were still being created is evidence the bank isn’t doing enough to stop it from happening. The main problem, the former employees said, is the aggressive sales culture, which was “nurtured and honed” over decades, including from the highest levels of the bank. “The branch managers were always asking, ‘How many solutions did you sell today?’” said Sharif Kellogg, who used to work at Wells Fargo. “They wanted three to four a day. In my mind, that was crazy; that’s not how people’s financial lives work.”

——————————–

Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 AML/KYC Tracker provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

Click to comment

TRENDING RIGHT NOW

To Top