Wells Fargo reaches $3 billion settlement with DOJ, SEC over fake-accounts scandal
The San Francisco bank admitted that for 14 years its aggressive sales goals led employees to open checking, savings and other accounts customers didn't want.
Wells Fargo on Friday agreed to pay $3 billion to settle potential federal criminal and civil charges that for more than a decade the bank's aggressive sales goals led to widespread consumer abuses, including millions of accounts opened without customers' consent.
Under its settlement with the U.S. Justice Department and the Securities and Exchange Commission, Wells Fargo acknowledged that it collected millions of dollars in fees as thousands of employees falsified records, forged signatures and misused customers' personal information in order to meet unrealistic sales goals. Bank leaders knew of the misbehavior but didn't stop it, according to the Justice Department.
"This case illustrates a complete failure of leadership at multiple levels within" Wells Fargo, U.S. Attorney Nick Hanna for the Central District of California, said in a statement. "Simply put, Wells Fargo traded its hard-earned reputation for short-term profits, and harmed untold numbers of customers along the way."
The $3 billion fine, which is about 15% of Wells Fargo's $19.5 billion in profits last year, is among the largest corporate penalties reached during the Trump administration.
Among the country's largest and most profitable banks, Wells Fargo has struggled to overcome the sales scandal, which ballooned as the bank admitted to other consumer abuses, including mistakenly foreclosing on hundreds of clients and repossessing the cars of thousands of others. This settlement announced Friday does not cover those admissions.
The bank was also fined $1 billion by the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency in 2018.
Last month, the OCC went further, taking the rare step of filing cases against specific Wells Fargo employees. It banned former Wells Fargo chief executive John Stumpf from working in banking again and fined him $17.5 million and filed civil cases against five other employees, including Carrie Tolstedt, the former head of community banking. It is seeking a $25 million fine from Tolstedt.
The bank imposed unrealistic sales goals on employees, who were "intimidated and badgered" to comply, the OCC lawsuit says. In 2010, one employee told senior executives: "The noose around our necks ha[s] tightened: we have been told we must achieve the required solutions goals or [we] will be terminated." Another employee wrote to the CEO's office and another senior leader in 2013, saying: "I was in the 1991 Gulf War. … This is sad and hard for me to say, but I had less stress in the 1991 Gulf War than working for Wells Fargo."
Bank executives ignored those warnings about their aggressive sales goals, which were helping fuel the bank's profits, according to regulators.
The settlement announced Friday does not cover any individual employees. No senior bank employees have been criminally charged.
Wells Fargo has repeatedly apologized for the sales scandals, overhauled its board and gone through three CEOs in three years, hiring an industry veteran, Charles Scharf, to take the helm last year.
Scharf told analysts last month that he is spending nearly all of his time addressing the regulatory headaches that have dogged Wells Fargo. The bank had made "terrible mistakes," he said, adding, "I don't have all the answers yet."
The scandals have made Wells Fargo a frequent target of Democrats on Capitol Hill, particularly Rep. Maxine Waters of California, chair of the powerful Financial Services Committee, and Sen. Elizabeth Warren of Massachusetts. "Bank executives like former @WellsFargo CEO John Stumpf should face jail time when the banks they lead break the law. I've got a bill to hold Wall Street executives personally accountable," Warren said in a recent tweet.
The potential settlement is not likely to satisfy all of the bank’s critics, and the Federal Reserve has yet to lift a ban it imposed on the bank, which has nearly $2 trillion in assets, from growing any larger until it fixes the cultural issues uncovered by the recent scandals.