Wells Fargo faces pressure from Congress and government regulators as allegations continue to surface about their business practices. The bank has admitted that they created millions of unauthorized accounts for existing customers. Senator Elizabeth Warren has called for the firing of Wells Fargo CEO Tim Sloan. Representative Maxine Waters has gone a step further and suggested that Wells Fargo be shut down entirely. How did a bank that was once considered too big to fail find itself in a position where the top Democrat on the Financial Services Committee is recommending that they lose their charter to operate?
In 2011, Wells Fargo employees began opening checking and savings accounts for millions of customers, without their knowledge. Many also received credit and debit cards for accounts they did not apply for. Customers began noticing this when they received statements that included fees for accounts and credit card processing. About 570,000 customers were forced into buying auto insurance that they did not need. Thousands of these people had their cars repossessed.
This practice continued for nearly five years, until regulators responded to complaints by customers. Then CEO, John Stumpf, was called before the Senate Banking Committee to explain what happened. Three weeks after a contentious appearance in Congress, Stumpf resigned as CEO and Sloan took over.
In the aftermath of that fall 2016 hearing, the Consumer Financial Protection Bureau fined Wells Fargo $185 million for misleading customers in ways that resulted in unnecessary account and credit card processing fees. A class action suit, brought by customers of the bank, was settled for $142 million. The bank fired over 5,000 people related to the scandal. They recently rehired more than 1,000 that they claim should not have been terminated during their internal investigation. Sloan also points to changes in practices in cross selling financial products and encouraging employees to speak up without fear of retaliation from management if they spot wrong doing.
It is unlikely that Wells Fargo will be shut down, having approximately 70 million customers and over 270,000 employees. The investigation continues into all aspects of their operations, including credit card processing. Wells Fargo could face more fines and even closer scrutiny from regulators as they continue to revise numbers on customers affected by the scandal.
