by Doreen McCallister
Wells Fargo has been feeling the heat since news broke earlier this month that it was being fined $185 million to settle allegations that thousands of employees secretly opened unauthorized accounts for customers in order to meet sales goals.
On Tuesday, Wells Fargo Chairman and CEO John Stumpf apologized for betraying customers’ trust during testimony before the Senate Banking Committee.
In prepared remarks, Stumpf said he is “deeply sorry” that the bank “failed to fulfill our responsibility to our customers, to our team members, and to the American public” and didn’t act sooner to stem what he called “this unacceptable activity.”
He went on to say, according to the text obtained by The Associated Press:
“I accept full responsibility for all unethical sales practices in our retail banking business, and I am fully committed to doing everything possible to fix this issue, strengthen our culture, and take the necessary actions to restore our customers’ trust.”
Sen. Richard Shelby (R-Ala.) pressed Stumpf on how much he and other top Wells executives knew about the misconduct — and when they knew it. In response, Stumpf said he became aware of it “sometime in 2013.”
Stumpf has been criticized for his handling of the scandal. In an interview last week, he shifted the blame toward employees.
Some 5,300 bank employees were fired after it was discovered they may have illegally created more than two million deposit and credit card accounts for customers without their knowledge in order to hit sales targets and earn bonuses.
Although workers were fired, the head of the retail banking unit responsible for creating the fake accounts, Carrie Tolstedt, is scheduled to walk away with nearly $125 million in stock and options when she retires later this year.
Senators on the banking committee asked whether the bank has plans to take back that compensation, which it has the power to do. In response, Stumpf said Tolstedt’s case will be reviewed and that he would not be making a recommendation.
The term is “clawbacks,” and The Washington Post reports that the subject of executive pay clawbacks is likely to take center stage at Tuesday’s hearing.
The Post says Wells Fargo asked retail banking employees to encourage customers to have eight different accounts with the bank — in what’s known as cross-selling — which is up from the prevailing average of six.
When it comes to cross-selling, Wells Fargo used the slogan “Eight is Great,” according to the newspaper.
For example, it aimed for each customer to have a checking account, savings account, car loan, mortgage, personal loan, credit card or other banking service.
Under the settlement, Wells Fargo neither admitted nor denied the allegations. The bank later said it plans to eliminate the sales targets by Jan. 1.
As The Two-Way reported, the bank “must pay $100 million to the Consumer Financial Protection Bureau — the largest fine ever levied by the federal consumer watchdog. It also will pay $50 million to the City and County of Los Angeles, along with a $35 million penalty to the Office of the Comptroller of the Currency.”
Robert Cordray, director of the CFPB, also is set to appear before the Senate Banking Committee as will the Treasury Department’s Office of the Comptroller of the Currency and the Los Angeles City Attorney’s Office.
Members of the panel are expected to quiz regulators on why Wells Fargo’s practices went on for years without being stopped.
On Tuesday, Democratic presidential candidate Hillary Clinton released an open letter to Wells Fargo customers saying she was “deeply disturbed” by the revelations. She also revealed a plan to address what she called “the culture of misconduct and recklessness” in the banking system.
Clinton’s rival in the Democratic primaries, Sen. Bernie Sanders, sent a letter to the CFPB asking: “Have your agencies made any criminal referrals to the Department of Justice regarding this matter?”
According to news reports, federal prosecutors are in the early stages of an investigation into the bank’s sales practices.