Can Wells Fargo redeem itself in wake of sales abuse scandal?

After $185 million in penalties and the firing of 5,300 employees, Wells Fargo & Co says it may take additional disciplinary action over sales abuses.

Ben Margot/AP/File
In this July 14, 2014, file photo, a man passes by a Wells Fargo bank office in Oakland, Calif. Regulators announced Thursday, Sept. 8, 2016, that Wells Fargo is being fined $185 million for illegally opening millions of unauthorized accounts for their customers in order to meet aggressive sales goals.

Wells Fargo says it will cut its aggressive product sales goals for retail bankers, as it seeks to earn back the trust of its customers.

Last week the banking giant (the world's largest bank, with a market capitalization of over $250 billion) was fined $185 million for allegedly opening up at least 2 million unauthorized accounts to meet those sales goals.

Wells Fargo will eliminate its product sales targets by Jan. 1, it said in a brief statement Tuesday. The bank also plans to spend $50 million each year for “enhanced training, monitoring, and controls,” as well explore more disciplinary actions over these abuses, Chief Financial Officer John Shrewsberry said at an investor conference the same day.

Tuesday's announcements are part of a series of actions by the bank to implement change throughout its organizations. Wells Fargo has also fired 5,300 employees for improper sales practices dating back as far as 2011. The announcements come as the Consumer Financial Protection Bureau (CFPB), formed in the wake of the subprime mortgage crisis, said it wants the rest of the banking industry to take heed, as CFPB Director Richard Cordray said this past Thursday, when the agency announced it will fine Wells Fargo $100 million.

“Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences,” said Mr. Cordray. “Wells Fargo built an incentive-compensation program that made it possible for its employees to pursue underhanded sales practices, and it appears that the bank did not monitor the program carefully.”

The fine is the largest the agency has levied against a financial institution since it was formed five years ago. The bank will also pay $35 million to the Office of the Comptroller of the Currency, and $50 million to the city and county of Los Angeles. It will also pay restitution to affected customers, of which it has already paid $5 million. 

Wells Fargo has $1.85 trillion in assets, according to Forbes.

The settlement agreement with Wells Fargo was reached following allegations bank employees opened more than 2 million unauthorized deposit and credit-card accounts, according to CFPB. They transferred money from customers’ preexisting accounts to these new ones, and issued and activated debit cards, and created PIN numbers, all without customers’ permission. Some employees even created fake email addresses to sign up customers for banking services, according to the agency.

Employees allegedly committed these practices in a bank known for its aggressive sales goals, with every customer of Wells Fargo having, on average, six different types of products with the bank. Executives highlight this so-called cross-sale ratio every quarter, according to the Associated Press. Wells Fargo also had a program called “Gr-Eight" for households to purchase eight products.

“We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers,” said chief executive John Stumpf, in the statement Tuesday. “Our objective has always been and continues to be to meet our customers’ financial needs and drive customer satisfaction.”

Among the monitoring and training programs Wells Fargo CFO Shrewsberry mentioned will be allowing a third party to go to different branches of the bank to root out bad behavior, according to The Wall Street Journal. Shrewsberry also said Wells Fargo would "take a big wide fresh look at who knew what and when and what else might have been done,” indicating the bank may take additional disciplinary action.

Carrie Tolstedt, who ran Wells Fargo’s consumer banking division, also stepped down in July.

Uncovered by the Los Angeles Times in 2013, the newspapers’ investigations first led the Los Angeles city attorney to sue Wells Fargo. The fines come just weeks after Wells Fargo agreed to pay a separate $4.1 million settlement on CFPB allegations that it charged illegal fees and misled student-loan borrowers.

In an interview with CNBC Tuesday, US Treasury Secretary Jack Lew said the fines highlighted “bad behavior,” but "how that flows through in terms of next consequences is going to depend on the facts of the case."

This report contains material from the Associated Press and Reuters. 

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to

QR Code to Can Wells Fargo redeem itself in wake of sales abuse scandal?
Read this article in
QR Code to Subscription page
Start your subscription today