Wells Fargo says bogus accounts total 3.5 million
The bank's initial assessment of up to 2.1 million fraudulent accounts jumps to 3.5 million after a third-party analysis
SAN FRANCISCO » Wells Fargo has increased its estimate for the amount of bogus bank accounts opened without customers’ permission by twothirds to 3.5 million, the bank disclosed Thursday.
“Today is a reminder of the disappointment we caused,” Timothy Sloan, Wells Fargo’s chief executive officer, said Thursday during a conference call to discuss a third-party analysis that uncovered the additional accounts, which may have been opened in a fraudulent fashion.
The bank initially had estimated up to 2.1 million bogus checking or credit accounts were opened without customers’ permission. It’s possible some of the 3.5 million accounts that were discovered through the new review were actually opened in a proper and legal fashion.
San Francisco-based Wells Fargo was fined $185 million in September 2016, when the scandal first came to light, for its role in allowing the accounts to be opened fraudulently.
“We apologize to everyone who was harmed
by unacceptable sales practices that occurred in our retail bank,” Sloan said Thursday.
The estimate arose out of a third-party probe commissioned by the bank.
“The completion of this expanded third-party analysis is an important milestone,” Sloan said.
The third-party firm created a system that erred on the side of customers in determining if an account had been fraudulently opened.
“These are potentially unauthorized accounts,” Sloan said during the conference call. He cautioned that it was possible some of the 3.5 million accounts were legitimate because some behavior associated with opening a fraudulent account mirrors the process of opening a legal account.
Wells Fargo’s initial analysis examined 93.5 million current and former accounts opened from May 2011 through mid2015. The expanded analysis scrutinized 165 million retail banking accounts over a nearly eight-year period from January 2009 through September 2016.
“We have almost doubled the time period of our review,” Sloan said.
The analysis produced a new estimate of 190,000 accounts that incurred fees and charges after they were fraudulently opened. The initial estimate was 130,000 such accounts.
Wells Fargo has decided to provide a total of $6.1 million in refunds and credits. Initially the bank decided to provide $ 3.3 million in payouts, and Thursday said it increased the number by $2.8 million.
Wells also said it discovered 528,000 enrollments in bill pay that might have been unauthorized. The bank will refund $910,000 in charges related to that activity.
“The fact that Wells Fargo has conducted an independent audit and extended the time frame they examined shows a real interest in trying to discover the depths of the problem so they can move forward,” said Michael Yoshikami, a banking industry expert and president of Walnut Creek- based Destination Wealth Management.
The bank’s former CEO, John Stumpf, who presided over the scandal, was ousted as CEO and replaced by Sloan. Carrie Tolstedt, who headed the Wells Fargo community banking division at the heart of the scandal, also departed.
Wells Fargo also stripped senior management of more than $180 million in pay. Stumpf forfeited $69 million, while Tolstedt for- feited $66.3 million. The bank also terminated 5,300 employees.
“We have cast a very wide net to reach customers and address their remaining concerns,” Sloan said.
In late July, Wells Fargo settled a class-action lawsuit linked to bogus accounts. As part of the deal, Wells Fargo set aside $142 million for customer remediation claims dating back to May 2002.
“I don’t think Wells Fargo has turned the corner yet to put the scandal behind them, but they are in the process of turning the corner,” Yoshikami said.