Wells Fargo chief defends bank’s progress in tense Senate hearing

Wells Fargo CEO Timothy Sloan testified Tuesday that the embattled bank is on a positive track forward as lawmakers excoriated the bank for fraudulent sales practices involving up to 3.5 million unauthorized accounts.

Sloan told the Senate Banking Committee that after “great disappointment and transition” at Wells Fargo the bank has made significant progress toward cleaning up its consumer banking division.

“Wells Fargo is a better bank today than it was a year ago. And next year, Wells Fargo will be a better bank than it is today,” Sloan said.

The hearing Tuesday was Sloan’s first appearance on Capitol Hill as Wells Fargo’s chief, and comes after a year of deepening scandal for the San Francisco-based bank.

Lawmakers from both parties criticized Sloan on Tuesday for the various scandals that had gone on allegedly without his knowledge, but the 30-year Wells Fargo veteran faced the harshest criticism from Democrats.

Democratic lawmakers went after Sloan for talking up the bank’s aggressive growth strategy to investors while leaders pressured lower-level employees with excessive sales goals. They also slammed the bank for pursuing arbitrated settlements with defrauded consumers as Democrats hone in on the controversial practice.

“You enabled this fake account scam, you got rich off of it, and then you tried to cover it up,” said Sen. Elizabeth Warren (D-Mass.), who is considered a potential 2020 presidential candidate. “At best you were incompetent, at worst you were complicit. Either way, you should be fired.” 

Several state and federal agencies are investigating Wells Fargo for fraudulent sales practices first revealed in late 2015. The bank opened up to 3.5 million bank and credit card accounts for customers since 2009 without their consent, charging 190,000 patrons $6 million in fees for services they never requested — 1.1 million more accounts than Wells Fargo initially admitted to opening in September 2016, when federal regulators first cracked down on the bank for the fraudulent sales.

Wells Fargo is also attempting to contain the fallout from other sales-related scandals.

The bank was caught signing customers up for unnecessary auto insurance and life insurance plans, and also paid a $108 million settlement after charging veterans hidden fees to refinance their mortgages.

The various scandals cost Wells Fargo customers millions in fees, points on their credit scores and, in some cases, their vehicles.

Sloan told lawmakers that he’s “deeply sorry” for Wells Fargo’s sales practices, the bank’s slow response to the scandals and for coming to Congress in 2016 “without a good plan.”

“We recognized too late the full scope and seriousness of the problems,” Sloan said. “We had not fully grappled with the damage the sales practices scandal had done to our customers, our team members, and their trust in the bank.”

John Stumpf, Sloan’s predecessor who left the bank last fall, was slammed by lawmakers last year in appearances before the Senate Banking panel and House Financial Services Committee. Lawmakers across both chambers and parties skewered Stumpf and said he should face jail time. He retired soon after.

Sloan’s testimony Tuesday outlined several steps taken by top Wells Fargo executives to pay retribution for the fraudulent sales.

No member of the bank’s operating committee who served before September 2016 received a bonus for that year, according to Sloan. Both Stumpf and former consumer banking chief Carrie Tolstedt forfeited their 2016 bonuses and gave up more than $60 million in compensation each.

Wells Fargo has also attempted to clean up its sales practices by eliminating incentives that pressured employees to open fake accounts, and implement new, stricter compliance standards across all bank branches.

But actions taken by Wells Fargo executives weren’t enough to satisfy the demands of angry lawmakers stunned by the cascading scandals. Despite the departures of Stumpf and Tolstedt, much of the bank’s senior leadership has stayed in place. Senators from both parties wondered how much Wells Fargo could actually change under the same executives.

“Your sales culture isn’t dictated by the sales products. It’s not the sales goals. It’s not the product selection. It’s the people,” said Sen. Tim Scott (R-S.C.). “If you haven’t changed the people, it’s quite difficult to change the culture.”

Sloan said that those responsible for the aggressive sales goals had been fired, and he was angry about the way his predecessors handled the scandals. He insisted that his long tenure at the bank equipped him well to clean up Wells Fargo, which had improved greatly in the past year.

“I have made mistakes. I certainly haven’t been perfect.” Sloan said, adding that he’s “made fundamental change at this company, so I’m not afraid to make changes when it’s needed.”

Sloan’s explanations didn’t satisfy Wells Fargo’s most ardent critics, who seized on the bank’s use of forced arbitration to settle lawsuits. Several unsuccessfully asked him to promise that the bank wouldn’t use forced arbitration to settle claims over fake accounts, as Sloan insisted the bank would make arbitration unnecessary for consumers.

Sloan enraged several Democrats during his testimony when he didn’t appear to know about cases where Wells Fargo asked courts to enforce arbitration clauses, a growing liberal target, in contracts for fake accounts.

“I would know about that if I were you, especially coming before this body, said Sen. Heidi Heitkamp (D-N.D.). “This is problematic for us, because we need to see that there is a culture change, that there is a reaction to these kind of consumer failures.”

“The only way we’re ever going to stop these scandals is to hold executives personally accountable,” added Warren, “to fire people who are responsible, and when they break the law, to march some of them out in handcuffs.”

—Updated at 1:44 p.m.