Wells Fargo (WFC) CEO Timothy Sloan announced his retirement suddenly Thursday afternoon, leaving the bank’s general counsel C. Allen Parker to take over as interim CEO. In the preceding months, in which Sloan was grilled by House lawmakers, the bank had been rumored to be looking for new leadership.
“It has become apparent to me that our ability to successfully move Wells Fargo forward from here will benefit from a new CEO and fresh perspectives,” he said in a statement.
Sloan stepped up from COO to replace former CEO John Stumpf, who had previously enjoyed a strong reputation leading the bank through the financial crisis. Stumpf was fired after the 2016 account fraud scandal.
After Sloan took over, scandal upon scandal continued to pop up, some of which were new and some had been past issues finally uncovered.
During that time, regulators, lawmakers, and the public continued to question the bank’s commitment to change, especially with Sloan at the helm — a 31-year company man who had been both Chief Operating Officer and Chief Financial Officer.
In January, Wells Fargo leadership, understanding that efforts to get past the company’s soiled reputation, launched a new marketing campaign changing the company logo’s colors and putting out advertisements talking about its “transformation.” This followed a 2018 ad campaign that said the bank was “re-established.”
With Sloan’s departure Wells Fargo looks to more fully turn over a new leaf, through fresh leadership without ties to the bank’s scandal-prone past.
In its press release, the bank’s board chair Betsy Duke said that “the Board has concluded that seeking someone from the outside is the most effective way to complete the transformation at Wells Fargo.”
Here’s a chronological overview of the biggest ones, starting with the fake account scandal in which millions of accounts were created without customers’ permission.
Stumpf stepped down in October 2016, so the first two events happened under his leadereship, when Sloan was COO.
September 2016: The fake account scandal
Wells Fargo’s public woes kicked off with $185 million in fines from the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the City and County of Los Angeles for the creation of 1.5 million fake deposit accounts and more than 500,000 fake credit cards, all in customers’ names and without their permission. The bank had fired 5,300 low-level employees for creating these accounts under extreme sales pressure. This kind of sales pressure was known to cause similar issues at large banks, academic research had shown.
In the aftermath of this scandal, then-CEO John Stumpf was fired and had $41 million in compensation clawed back. Later that month Wells Fargo said it would stop unreasonable sales goals.
In a class action suit, Wells Fargo agreed to pay $142 million to the affected parties, which included millions of customers.
September 2016: Improperly repossessing service members’ cars
The Department of Justice slapped Wells Fargo’s wrist for improperly repossessing the cars of members of the military.
The bank did not limit interest rates to 6% (as is required by law), failed to tell courts the borrowers were active-duty when it asked for evictions, and failed to obtain court papers prior to repossessing cars.
The bank ended up paying $20 million in fines to the OCC and made restitution of over $10 million to wronged service members.
December 2016: Wells Fargo fails its ‘living will’ test
U.S. regulators restricted Wells Fargo’s size after it failed a “living will” test, a requirement that big banks must show how they would unwind in the event of a bankruptcy.
March 2017: More fake accounts
A new estimate of 3.5 million fake accounts emerges, a figure 1.4 million higher than the initial estimates when the scandal first emerged. Wells Fargo said this number was unverified and hypothetical, but eventually said there may be up to 3.5 million accounts.
March 2017: Flunked community lending test
Wells Fargo did very poorly on an OCC test for community lending, getting a “needs to improve.” The regulator cited “violations across multiple lines of business within the bank” and “significant harm to customers.” The regulation is to promote lending in lower-income communities.
April 2017: Whistleblower wins $5.4 million and his job back
OSHA ordered Wells Fargo to pay $5.4 million to a former Wells Fargo wealth manager, fired in 2010, after reporting potential fraud to a hotline. The bank has fought the fine and in August 2018 more of the story emerged.
August 2017: Lawsuit over overcharging small business retailers
Wells Fargo was sued for allegedly overcharging small business retailers for credit card services, hitting them with massive early termination fees and a “deceptive” 63-page fine print agreement that hid terms from small-business retailers. A former employee told CNNMoney that “God would have had a hard time” escaping the contract, and that the employee was told to target “mom-and-pop shops without legal support.”
The bank denies and is fighting the claims.
February 2018: Federal Reserve restricts size
In February, the Federal Reserve announced it would restrict the bank’s growth, “responding to widespread consumer abuses and compliance breakdowns.”
February 2018: Sacramento sues over discrimination against black and Latino borrowers
The city sued the bank, citing illegal practices that suppressed property values in “minority and low-income communities,” costing the city in the process. According to the city, black borrowers with FICO scores over 660 were three times as likely to get a high-cost or high-risk loan as a white borrower.
The lawsuit is ongoing, and the bank is fighting the charges.
March 2018: Wealth management investigation emerges
The Wall Street Journal reported that the Justice Department had told Wells Fargo to investigate its wealth-management business. The bank said it was investigating “whether there have been inappropriate referrals or recommendations,” within its Wealth and Investment Management business.
April 2018: $1 billion settlement for mortgage locks and auto-loan issues
Wells Fargo, the CFPB, and the OCC reached a $1 billion settlement for auto-loan issues and mortgage practices. Wells Fargo acknowledged it had charged people with car loans for insurance without their knowledge, even if they already had insurance. The issues bubbled to the surface the previous summer and fall after the bank was hit by lawsuits from wronged consumers.
The bank had also charged customers for extending mortgage-rate locks, even if the bank was responsible for the delay.
May 2018: Altering business information without client knowledge
The Wall Street Journal reported that Wells Fargo’s wholesale banking division altered business information like Social Security numbers and dates of birth without client knowledge. The Journal said that the incidents happened as the bank was trying to comply with a deadline related to an anti-money laundering control.
Wells Fargo said no customers were negatively impacted.
May 2018: $480 million to settle securities-fraud lawsuit
In the wake of the fake account scandal, Wells Fargo faced securities fraud allegations. Investors claimed the bank knew about the fake account issue but failed to disclose it to investors, who considered it material. The bank settled for $480 million.
June 2018: SEC fine for leading investors astray
The SEC heaped a $4 million fine on Wells Fargo and forced it to repay over $1 million in ill-gotten gains and interest to mom-and-pop investors at Wells Fargo Advisors, the bank’s brokerage arm.
The bank was encouraging investors to actively trade high-fee debt products that were not supposed to be actively traded. The bank did not admit wrongdoing but made changes in response to the matter.
July 2018: Refunds over add-ons like pet insurance and legal services
Wells Fargo refunded tens of millions of dollars, according to the Wall Street Journal, after adding services like pet insurance and legal services to consumers’ accounts without consumers’ “full understanding.” The bank stopped add-on products in 2017. Other banks have paid settlements over similar issues.
July 2018: Private Bank wealth management issues
Yahoo Finance uncovered issues with the Private Bank part of Wells Fargo’s wealth management business. For years, the bank had operated with a heavy sales culture that pressured advisors to make decisions not necessarily in their clients’ best interest.
August 2018: Wells Fargo pays $2.1 billion for its role in housing bubble
Wells Fargo agreed to pay a $2.1 billion fine after facing allegations that it had improperly represented mortgages it sold to investors during the housing bubble. This was expected and is similar to the other banks involved in the financial crisis, but Wells Fargo was one of the last banks to deal with these issues.
August 2018: Hundreds of houses foreclosed on due to computer glitch
The bank had to set aside $8 million to make things right for 625 people who were incorrectly denied loan modifications; 400 of them had their homes foreclosed upon.
March 2019: Wells Fargo among advisors sanctioned by SEC for fee-disclosure practices
Wells Fargo among one of the 79 firms that were sanctioned by the SEC for having advisors select more expensive mutual funds for clients, which resulted in more fees for those advisors.