WASHINGTON—Wells Fargo’s CEO, John Stumpf, at the center of a company-wide scandal over employees opening unauthorized bank accounts and credit cards to meet sales targets, said he is “deeply sorry” for those actions, and further admitted the bank moved too slowly to address signs of staff wrongdoing.
Those practices led to the massive $185 million in fines handed down by the regulators against Wells Fargo.
In remarks delivered to the Senate Banking Committee Tuesday, Stumpf said that he takes “full responsibility” for the unethical activity.
Stumpf was grilled during that hearing about the bank’s creation of more than one-million fraudulent accounts. Click here for Stumpf’s responses to the Committee’s questions.
One big question has been why only front-line employees are taking the fall, with critics arguing that the more than 5,000 employees involved—who have since been fired—could not have been acting individually to create all the unauthorized transactions—as many as 565,000 unauthorized credit cards and 1.5 million fake bank accounts. But Stumpf told the Committee that the unethical behavior was not part of an “orchestrated effort, or scheme, as some have called it, by the company.”
“We never directed nor wanted our employees, whom we refer to as team members, to provide products and services to customers they did not want or need,” Stumpf testified.
Again, a contrite Stumpf recognized in front of the Committee that Wells Fargo failed in stopping staff from continuing to act unethically. He said that Wells Fargo “failed to fulfill our responsibilities to our customers, to our team members, and to the American public. . . I want to apologize for violating the trust our customers have invested in Wells Fargo. And I want to apologize for not doing more sooner to address the causes of this unacceptable activity.”
Measures To Prevent Unethical Behavior
Stumpf told the Senate that Wells Fargo has implemented a number of measures to attempt to stop the unethical behavior, including the firing of those more han 5,000 employees over five years. Stumpf explained that in addition to those terminations, the bank has instituted progressive changes to detect and deter the unethical behavior, including creating a “sales and service conduct oversight team” in 2011, reducing the number of employees eligible for sales incentives, and reducing sales goals—which Stump said were reduced by 30% from 2012 to 2015 for branch employees.
“In 2013 and 2014, we made several changes to our incentive compensation plans to better align incentive pay with ethical performance,” Stump said.
The CEO stated that going forward the bank is taking additional steps to prevent unethical behavior among its team. He said Wells Fargo has:
- Established a sales conduct risk oversight office reporting to the chief risk officer.
- Created a new branch compliance program dedicated to monitoring for sales practice violations.
- Implemented a process whereby within one hour of opening an account a customer will receive an e-mail confirming the opening of the account.
- Revised procedures for credit cards to require each applicant’s documented consent before a credit report is pulled.
- Started contacting all customers with open, inactive credit cards to confirm whether the customer authorized the account.