The U.S. Labor Department and committees of the Senate and House should be applauded for digging into alleged abuses by Wells Fargo employees in opening millions of unauthorized accounts to meet sales goals.
The Labor Department investigation follows lawmakers on the Senate Banking Committee who grilled Wells Fargo Chief Executive John Stumpf on Sept. 20 over the mega-bank’s abuses. Stumpf on Thursday testified at the House Financial Services Committee hearing.
Stumpf apologized for the second-largest U.S. bank’s irresponsible actions and slow response, promising now to aid customers whose credit has been negatively affected.
Wells Fargo sales employees were under pressure to meet sales goals that called for every customer to have eight products with the bank. The employees opened more than 2 million potentially unauthorized bank and credit card accounts. Regulators who disclosed the unsavory practice levied a $185 million fine against the bank.
Money in customers’ accounts was thought to have been moved to the new unauthorized accounts. Debit cards were issued and activated with PINs being created without customers’ knowledge.
Under a settlement with regulators, Wells Fargo neither admitted nor denied the allegations. About 5,300 bank employees have been fired since 2011.
Properly so, Stumpf will have to forfeit $41 million in stock awards. Carrie Tolstedt, the executive who ran the bank’s consumer banking division, will give up $19 million of her stock awards. Tolstedt and Stumpf also will forfeit bonuses for 2016.
Tolstedt had announced that she would retire from the bank this year and earlier had been expected to exit with as much as $125 million in salary, stock options and other compensation. That changed after the well-publicized grilling Stumpf endured in front of the Senate Banking Committee.
Sen. Elizabeth Warren, a Massachsetts Democrat, labeled the sales practices a “scam” and called for Stumpf to resign. House members last week also stressed that he resign and suggested that criminal charges be considered.
The elected officials have made excellent points while making those demands.
Warren questioned whether Stumpf and other Wells Fargo senior executives truly had no knowledge of the problems until 2013 when the Los Angeles Times reported the sales misconduct. The practice apparently started as far back as 2009.
For the sake of public trust in banks, the current investigations have to result in more than minuscule worries for Wells Fargo. Like many megabanks, Wells Fargo is in that “too big to fail” league.
The concern is this flap will blow over just like the subprime mortgage scam and other banking shadiness did after taking the country into the Great Recession. Wells Fargo & Co. in 2012 agreed to pay at least $175 million to settle federal allegations that it systematically overcharged minorities during the housing boom.
Last week Wells Fargo & Co. agreed to pay $4.1 million to settle a Justice Department investigation into the improper repossession of 413 vehicles owned by members of the U.S. military. The bank also was fined $20 million by the Office of Comptroller of the currency for other violations dating to 2006.
Such wrongdoings and how long they went on continue to raise concerns about the honesty of big U.S. banks when it comes to serving their customers.