Wells Fargo sets out to rebuild clients’ confidence
In wake of scandal, bank says it will end product sales goals
Wells Fargo said Tuesday it will end banking product sales goals at the end of this year, a move to help rebuild consumer confidence after the company was hit last week with a fine for secretly opening millions of fake accounts for customers without their permission.
One of the nation’s largest banks, Wells Fargo was fined $185 million last week by the Consumer Financial Protection Bureau, Treasury Department and the city and county of Los Angeles for employees opening more than 2 million deposit and credit card accounts that may not have been authorized by consumers.
The San Francisco-based bank said it has terminated about 5,300 employees over a five-year period for their involvement with the unauthorized accounts, which workers made to meet sales goals and targets. The findings stem in part from an L.A. County Superior Court lawsuit filed last year.
Wells Fargo CEO John Stumpf said the company took the step to allay consumer concerns. “We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers,” he said in a statement released by the bank Tuesday.
“The elimination of product sales goals represents another step to reinforce our service culture, helps ensure that nothing gets in the way of our ability to achieve our mission and is consistent with our commitment to providing a great place to work,” he said.
Shares of Wells Fargo fell more than 3% Tuesday. The Wall Street Journal reported Monday that Wells Fargo had instructed some employees to stop cross-selling multiple bank products. Wells Fargo says this “directive” is only a temporary action.
That makes more sense than a year-end cutoff, said Erik Oja, analyst at S&P Global Equity Research. “I was a little bit surprised,” he said. “I think that it’s something that should be effective immediately.”
The Senate Banking Committee plans a hearing Sept. 20 to investigate the matter involving the nation’s largest bank, based on stock market value.
In a letter Monday to Sen. Richard Shelby, R-Ala., chairman of the committee, five Democratic senators including Sen. Elizabeth Warren, D-Mass., said they want to learn “how it is possible that more than 5,000 employees could bilk customers over the course of five years.”
Many questions remain to be answered, Oja says. “We want to know why it was so widespread and where are their systems to catch that?” he said. “It wouldn’t have bothered me one bit if it had been five people in a rogue office. But the fact that it is so widespread, it’s terrible.”
Unauthorized customer account activity peaked in 2013, and two-thirds were concentrated in the southwest U.S., said John Shrewsberry, Wells Fargo chief financial officer, speaking Tuesday at Barclays’ 2016 Global Financial Services Conference in New York.
Of the 5,300 employees fired in connection with the activity, 10% were managers or higher-level employees, he said.
“The analysis with all the data is still ongoing,” Shrewsberry said.
The company’s annual cycle of operational risk-loss reviews will be “an opportunity to take a big, wide, fresh look at who knew what and when, and what else might have been done,” he said.