Wells Fargo chief Timothy J. Sloan fell under blistering criticism Tuesday from members of the Senate Banking Committee who attacked the banking giant’s fraudulent business practices, customer treatment, corporate culture, and Mr. Sloan’s role in the misconduct.
For years, Wells Fargo’s community banking division instituted aggressive sales goals that encouraged its employees to open unauthorized deposit and credit accounts under customers’ names and then charge them for the unwanted accounts. In that scheme, Wells Fargo bankers preyed upon as many as 3.5 million Wells Fargo customers.
In another more recently revealed scheme, Wells Fargo enrolled about 600,000 of its auto loan customers in auto insurance policies they didn’t ask for or need, and often making it difficult for the customers to get out of the policy. This scam caused some customers to default on their loans and have their cars repossessed.
“What in God’s name were you thinking? I am not against big, but with all due respect, I am against dumb. I am against a business practice that has put Wells Fargo first and customers second,” said Sen. John Neely Kennedy (R-La.).
Members of the Senate committee were skeptical of Mr. Sloan’s vow to fix the problem and treat the bank’s customers with integrity and respect.
Sen. Sherrod Brown (D-Ohio), the ranking Democrat on the committee, said the changes Wells Fargo have made so far ”are not sufficient to reform a corporate culture that is willing to abuse its customers and employees in an effort to pad its numbers and increase executive compensation.”
According to The Washington Post, Elizabeth Warren produced a large binder full of statements Mr. Sloan made to investors in his three decades with the bank that cast doubt on his ability to change the rampant misconduct that runs deep within the company.
The statements in the binder showed that Mr. Sloan frequently bragged about Wells Fargo’s sales methods. The bank’s deceptive practices helped boost the value of its shares, but at the expense of millions of its customers.
“At best, you were incompetent, and at worst, you were complicit,” Sen. Warren said. “Either way, you should be fired.”
“Wells Fargo needs to start over and that won’t happen until the bank rids itself of people like you who led it into this crisis,” she added.
Mr. Sloan attempted to defend his three decades of experience in the bank and the value of that experience when it came to reforming the company, but Sen. Warren wasn’t having it.
“Are you kidding? There is a broken culture at Wells Fargo that still needs to be changed,” she said. “Wells Fargo is not going to change with you in charge.”
Perhaps the most telling moment of two-hour hearing – the point that seemed to test the sincerity of Mr. Sloan’s vow to treat Wells Fargo customers fairly – came when Sen. Brown asked him whether he planned to change Wells Fargo’s practice of forcing its customers into arbitration whenever they had a dispute. As a condition of doing business with Wells Fargo, the bank requires its customers to surrender their right to sue, even in cases of alleged fraud and wrongdoing.
“Will you commit to this committee that you will stop requiring forced arbitration?” Sen. Brown asked.
“No, I won’t, Senator,” Mr. Sloan replied.