Wells says scandal larger than estimated
Wells Fargo on Thursday announced that it had potentially opened an additional 1.4 million sham accounts that customers didn’t want, 67 percent more than it initially estimated, escalating an already contentious battle over the future of the mega bank.
The revised total, 3.5 million, means that Wells Fargo employees have been opening unauthorized credit card and bank accounts for customers for far longer than the bank initially acknowledged. The eye-popping figure will hamper the banks’ efforts to move beyond the nearly year-long scandal as lawmakers and regulators delve deeper into its inner workings and demand changes.
It also comes amid simmering debate over whether Wall Street has learned from its mistakes that caused the 2008 financial crisis and should have its regulatory reins loosened. Republicans in Congress who support such regulatory relief have acknowledged that Wells Fargo’s repeated stumbles could make that more difficult.
“We apologize to everyone who was harmed by unacceptable sales practices,” Wells Fargo CEO Tim Sloan said. “We are working hard to ensure this never happens again and to build a better bank for the future.”
But even Wells Fargo’s revised figure could be underestimating the extent of the problem. For its latest review, Wells Fargo examined internal data dating to 2009 rather than 2011 as it had done initially, leading it to identify the additional 1 million fake accounts. Yet, the bank has acknowledged that unauthorized accounts have been found as far back as 2002.
The bank doesn’t plan to extend its review far enough to identify potential customers, Sloan said. “The data just is not as available or as high-quality,” he said. “We’ve cast a wide net to reach customers and address their remaining concerns.”
The latest review also does not address other scandals that have beset the firm recently, including that 570,000 of its customers were charged for auto insurance they didn’t need, driving some to loans and have repossessed.
Even one of Wells Fargo’s largest shareholders, Warren Buffet, appears to have become weary of the controversy. “Anytime you put focus on an organization that has hundreds of thousands of people ... you may very well find that it wasn’t just the one who misbehaved that you find out about,” he said on CNBC Wednesday.
“What you find is there’s never just one cockroach in the kitchen.”
These revelations will keep the “political and regulatory spotlight” on the bank for some time, Jaret Seiberg, an analyst with Cowen, said in a research report Thursday. “What the bank needs to do is build political capital so it can escape this controversy,” Seiberg said. “Hurricane Harvey could provide that opportunity if the bank is seen as taking the lead in helping with the recovery.” default on their cars
This comes nearly a year after Wells Fargo was fined $185 million by regulators after acknowledging that employees had opened unauthorized accounts for customers to meet the bank’s aggressive sales goals and qualify for bonuses. Wells fired 5,000 employees over for the practice.
Of the 3.5 million potentiality unauthorized accounts the bank has now identified, about 190,000 incurred fees and other charges, Wells Fargo said, up from its initial estimate of 130,000. It is now expected to issue refunds of more than $6 million, double its initial estimate.
The expanded review also found problems in another part of the bank’s business. About 528,000 accounts were potentially enrolled in online bill pay programs without customers’ knowledge. The bank said it would refund $910,000 to those customers who incurred fees or charges.