Wells Fargo sought to control its unethical sales practices that brought settlements totaling $185 million, announced Sept. 8, by hiring mystery shoppers and dropping sales quotas effective Jan. 2017.
John Shrewsberry, the bank’s chief financial officer, spoke Sept. 12 in New York at the Barclays 2016 Global Financial Services Conference and detailed the bank’s internal investigation and resulting new practices. The bank spent $50 million on monitoring, including a mystery-shopper program that conducts more than 15,000 visits a year. Changes include “putting greater priority on customer service, loyalty and ethics,” Shrewsberry said.
“This morning we took the further step of announcing the elimination of sales goals in retail banking,” effective Jan. 1, he said.
An outside consultant examined more than 82 million deposit accounts and about 11 million credit-card accounts opened since 2011, Shrewsberry said. About 2 percent of the accounts may not have been authorized, including 1.5 million deposit accounts and 565,000 credit-card accounts.
About 115,000 of the likely unauthorized accounts had incurred fees that were not warranted. Wells Fargo refunded $2.6 million to customers who held those accounts, averaging $25 per account.
San Francisco-based Well Fargo settled claims that its sales employees opened more than 2 million unauthorized new accounts for customers in order to meet sales quotas and earn bonuses. The Consumer Financial Protection Bureau fined Wells Fargo $100 million; the Office of the Comptroller of the Currency fined the bank $35 million; $50 million will go to Los Angeles, which sued Wells Fargo in 2015.
The $185 million was fully accrued for at the end of the bank’s second quarter, Shrewsberry said.
“Some of our retail customers may have received products and services they did not authorize,” Shrewsberry said. Customer interactions “were not handled as they should have been,” he said.
“We have made changes to our performance expectations at all levels of the organization,” he said.
Wells Fargo reported second-quarter 2016 earnings of $5.6 billion, revenue growth of 4 percent compared to the previous year, and pretax preprovision profit up 5 percent year-over-year.
“We take this issue very seriously,” Shrewsberry said. “We have made fundamental changes as a result of our findings,” including terminations of about 5,300 managers and team members “who acted counter to our values.”
It remains a mystery who was the highest-ranking manager or executive responsible for the errant sales conduct. Carrie Tolstedt, who led the community banking group, announced earlier this year that she would retire after 27 years with the bank. Her estimated total compensation was more than $124 million.
The terminations — about 1 percent of the employees in each store — took place over the past five years.
“Our vision is built around our focus on our customers,” Shrewsberry said. “We want to satisfy our customers’ financial needs and help them succeed financially,” he said. “Our culture is centered on doing what is right for our customers.”
On Sept. 12, the Senate Banking Committee Republican majority called for a hearing on the situation at Wells Fargo. The hearing is scheduled for Sept. 20.
On Sept. 15, Wells Fargo stock continued its drop, down more than 9 percent from its price on Sept. 1 and down more than 18 percent from November 2015.
James Dunn covers technology, biotech, law, the food industry, and banking and finance. Reach him at: email@example.com or 707-521-4257