WASHINGTON (AP) — The CEO of Wells Fargo apologized before harshly critical senators Tuesday for betraying customers’ trust in a scandal over allegations that employees opened millions of unauthorized accounts and moved money into them.
Chief Executive John Stumpf showed contrition in testimony to the Senate Banking Committee, saying he is “deeply sorry” that the bank failed to meet its responsibility to customers and didn’t act sooner to stem what he called “this unacceptable activity.” He promised that the bank will contact every affected customer.
Sen. Richard Shelby, R-Ala., the panel’s chairman, said Wells Fargo had a corporate culture “that drove company `team members’ to fraudulently open millions of accounts using their customers’ funds and personal information without their permission.”
“If there were ever a textbook case where consumers needed protecting, this was it,” Shelby said.
As part of the sharp questioning, Stumpf was pressed on whether Wells Fargo employees committed fraud, and Sen. Bob Corker of Tennessee said it would be “malpractice” if the bank doesn’t institute compensation clawbacks.
The bank has in place executive compensation clawback provisions that the board could implement. Stumpf said during the hearing that the company’s board “has the tools to hold senior leadership accountable,” including himself and Carrie Tolstedt, the former head of the retail banking business.
Tolstedt announced in July her retirement from the bank this year. Tolstedt is expected to leave with as much as $125 million in salary, stock options and other compensation.
Wells Fargo has long been known for its aggressive sales goals, but the details and the $185 million fine that regulators imposed last week have singed the consumer banking giant’s reputation as a well-run, tightly managed company removed from the reckless conduct on Wall Street that stoked the financial crisis.
In announcing the fine, regulators said Wells Fargo sales employees opened more than 2 million bank and credit card accounts that may not have been authorized by customers. Money in customers’ accounts was said to have been moved to these new accounts without their permission. Debit cards were issued and activated, as well as PINs created, without telling customers. In some cases, bank employees even created fake email addresses to sign up customers for online banking services, the regulators said.
The bank sales staff had a goal of getting each customer to have eight different accounts with the bank — up from the prevailing average of six.
Under the settlement, Wells Fargo neither admitted nor denied the allegations. It later said it plans to eliminate the sales targets by Jan. 1. Some 5,300 Wells Fargo employees have been fired.
Stumpf offered some detail at the hearing about who was fired, saying “bankers, bank managers, managers of managers, and even an area president.” They ranged in pay from about $35,000 to $65,000.
The panel also plans to question regulators from the Consumer Financial Protection Bureau, the Treasury Department’s Office of the Controller of the Currency and the Los Angeles City Attorney’s Office. Senators are examining their role in the debacle and why the sales practices went on for years before the regulators cracked down.
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