Wells Fargo CEO grilled by bipartisan lawmakers over scandals
Washington — Michigan representatives were among the lawmakers who blasted Wells Fargo CEO Tim Sloan on Tuesday for the company's recent scandals and its response to them.
Sloan told the House Financial Services Committee that the banking company has centralized its structure, beefed up its risk management profile and revised incentive pay for retail bankers that had led to previous bad behavior.
“As a result, Wells Fargo is a better bank than it was three years ago, and we are working every day to become even better," Sloan said in prepared remarks.
Still, member after member on the committee questioned whether the bank's culture has really changed.
"This is a management nightmare, but it's also a nightmare for the customers who were affected at every level," said U.S. Rep. Bill Huizenga, R-Zeeland.
Huizenga, a senior Republican on the panel, said he personally knew people affected by the Wells Fargo employees who opened up to 3.5 million accounts in customer's names without their consent or knowledge, as first revealed in 2016.
He said he also knew individuals hurt when Wells Fargo attempted to fix the problem, when those people "had difficulties having bank deposit boxes being seized and other things."
"I do need to emphasize publicly what I said to you privately, and you're hearing echoed here: The profound disappointment, anger, frustration that so many of us have," Huizenga said.
Committee Chairman Maxine Waters, D-California, recounted a list of Wells Fargo "wrongdoings" in her opening statement, including over 500 people who lost their homes between 2010-18 because of a bank software error that led to faulty foreclosures.
"What this long but impartial list makes clear is that Wells Fargo is a recidivist financial institution that creates widespread harm with a broad range of offenses. What's more, this misconduct appears to persist," Waters said.
She, Huizenga and others referred to a March 9 piece in the New York Times in which Wells Fargo employees said they continue to feel "heavy" pressure to upsell customers, despite the changes to sales practices trumpeted by Sloan.
Waters noted that the Federal Reserve Board last year took the unusual step of capping the bank's growth — a restriction that remains in place.
Rep. Patrick McHenry, the committee's ranking Republican, elicited an acknowledgement from Sloan that the bank is operating under 14 different consent decrees from federal regulators.
One of those, the Office of the Comptroller of the Currency, told Congress last fall it's "not comfortable" with Wells Fargo's efforts to reimburse customers harmed by recent scandals related to the bank's auto-lending and mortgage businesses.
“Each time a new scandal breaks, Wells Fargo promises to get to the bottom of it and promises to make sure it doesn’t happen again," said McHenry of North Carolina.
"But then a few months later, we hear about another case of dishonest sales practices or gross mismanagement."
McHenry pressed Sloan on what he's doing to change the bank's "front-line" culture.
"Can you give me your personal assurance that this is the end of customer harm?" he asked.
"I can't promise you perfection, but what I can promise you is the changes that we've implemented — the substantive changes we've implemented since I've become CEO are going to prevent them from occurring as best we can," Sloan replied.
Freshman Rep. Rashida Tlaib, D-Detroit, questioned Sloan about what Wells Fargo did in response to the software error that led to 870 improperly denied mortgage modifications and 545 faulty erroneous foreclosures.
She suggested the true number of foreclosures is even higher than the bank's internal report had found.
"So many people are using the words 'consumer abuses,' 'scandals.' But if you look at the definition of scams, they're fraudulent acts — intentional fraudulent acts," she said.
"These are 545 people. They didn't lose a boat. They lost their home. What are you doing to help them?"
Wells Fargo sent each one a $15,000 check, Sloan said. The company also asked them to tell the bank about any other additional harm to them, "and we'll make it right," he added.
"Mr. Sloan, the additional harm — and I can tell you this from my district — is their credit scores. Their consumer report. It is the access now to not only housing and loans but to employment," Tlaib said.
"I have young people now, who can't even get into the military. ... Car insurance — everything is tied to consumer reports. How do you address that?"
"That's why we're working very closely to remediate those customers," Sloan said.
"I think the credit bureau needs to know it was your mistake, as well," Tlaib said.
Sloan repeated that what "we're also doing is asking each to come in and see us and tell us what additional harm if any —"
"But Mr. Sloan, they might not know what those additional harms are," Tlaib interjected.
Sloan said Wells Fargo's remediation team has experience in dealing with such issues as Tlaib raised about credit scores.
Tlaib also asked him about what she called a "quota" for Wells Fargo debt collectors to place 375 calls per day.
"How can those consumers expect to receive good experience, but also enough time to solve their problem?" she asked.
Sloan said he couldn't confirm the bank has a minimum standard of 375 calls a day, and Tlaib asked him to follow up with that information for the committee.
Huizenga asked Sloan if he was "uncomfortable" with the previous bank leadership's decision-making on policies that led to the scandals such as opening accounts in customers' names or getting them to buy unnecessary car insurance.
Sloan said when he learned about the retail sales practices initially, he and others talked to the head of Wells Fargo's Community Bank about whether the allegations were correct and if there was a "significant problem."
"The head of the Community Bank said, I've got this under control. But we didn't have the risk and control functions outside of the Community Bank," Sloan said, noting that structure has since changed.
"There is a legitimate question here: What is the culpability of the entire C suite in this?" Huizenga said.
"Also, it seems to me in a publicly traded company like this, of the board — the previous board."
Sloan said Wells Fargo has since separated the role of chairman and CEO, appointed a new chairwoman, and added seven new board members out of 13 total, including those with experience in cybersecurity, risk assessment and "reputational issues."
"They're doing a terrific job," Sloan said.