U.S. Sen. Sherrod Brown (D-OH) – ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs – released the following opening statement at today’s hearing entitled, “Wells Fargo: One Year Later.”
Brown’s remarks, as prepared for delivery, follow.
Thank you Chairman Crapo for holding this hearing.
A year ago, then-Wells Fargo CEO John Stumpf sat in this hearing room attempting to explain the inexplicable. The bank’s punitive sales goals had pressured its employees into opening over 2 million fraudulent checking and credit card accounts.
In written follow-up questions for the record, Committee Democrats asked Mr. Stumpf if he was confident that this type of fraudulent activity did not exist in other parts of Wells Fargo. We asked about a variety of products, including insurance.
On November 15, 2016, Wells Fargo responded that, “We believe that the activity at issue here was limited to certain team members within the Community Banking Division.”
We have learned over the past year that the problems at Wells Fargo are much larger and more systemic than the bank originally disclosed.
Before being forced to come clean by a multi-agency investigation, Wells Fargo went to great lengths to bury this scandal.
It subjected customers to forced arbitration, preventing them from their day in court, further concealing the fraud. Employees who tried to alert senior management to the treatment of Wells Fargo’s customers were silenced or fired.
In 2013, a California customer sued, claiming Wells had opened several unauthorized accounts in his name. Wells Fargo forced that case out of the courts and into non-public arbitration, claiming that the terms of a real account should govern the fake ones.
In 2015, another customer in California filed a class action against Wells Fargo for the same practices – and the bank used its fine print legalese to fight for the case to be kept under seal.
Has the company changed? Just two months ago, Wells Fargo used its forced arbitration clause to argue that it shouldn’t have to pay customers it cheated on overdraft fees.
In August of this year, Wells Fargo finally disclosed that the number of fraudulent accounts was at least 3.5 million -- 70 percent higher than it originally reported. The bank also revealed that it had stuck 800,000 customers with auto insurance policies – without telling them or checking to see if they already had insurance.
The bank was aware of the problems in its auto loan division in July 2016. And yet Wells Fargo told this committee that fraudulent sales practices were limited to the Community Bank.
Mind you, this was not a casual response to a question that caught somebody off guard in a hearing, but a written response that undoubtedly was approved by lawyers and others at the bank. Maybe even you, Mr. Sloan, were among those who saw the response before it was sent to Congress.
A week after last year’s hearing, the Board of Directors initiated its independent review of the company’s sales practices. The report to the Board, whose members are paid an average of $370,000 to prepare for and attend several meetings a year, found that the fault lay elsewhere.
That is cold comfort to the thousands of employees—who make perhaps one-tenth of what the Board does—who were fired for failing to generate enough new accounts.
The Board also chose to limit the scope of the review to the Community Bank, which is troubling. It should have known, or should have wanted to know, that additional problems existed in other divisions.
The changes Mr. Sloan and his team have made are not sufficient to reform a corporate culture that is willing to abuse its customers and employees in an effort to pad its numbers and increase executive compensation.
In light of the millions of Americans defrauded by Wells Fargo, the recent Equifax breach that compromised 145 million Americans’ personal financial information, and the SEC breach that led to insider trading, it is no wonder the public doesn’t trust our financial system.
We need strong rules to guard against abuses in forced arbitration, payday lending, debt collection, mortgage servicing, and credit reporting accuracy.
Rather than working to roll back consumer protections, we should be supporting the Consumer Financial Protection Bureau and other financial watchdogs that stand up for hardworking Americans when big companies take advantage of them.
Thank you Mr. Chairman.