Latest Wells Fargo CEO Contrite at House Hearing, Promises to Do Better

Chris Gaetano
Published Date:
Mar 11, 2020

At a hearing before the House Financial Services Committee on March 10, Charles W. Scharf, the latest CEO of scandal-ridden bank Wells Fargo, conceded that the company culture was broken and the business model flawed, according to the New York Times

The fourth CEO in as many years, Scharf distanced himself from his predecessors, who, he said, did not take the regulators seriously. He said that, under his leadership, the bank will address the numerous demands for change placed upon it, which he conceded would require running the company in a fundamentally different way. This will include, he said, replacing much of the company's top leadership, increasing oversight of previously independent business units, and centralizing responsibility for regulatory compliance under a new chief operating officer. However, according to MarketWatch, the changes necessary to meet these challenges won't be finished until at least next year. 

Wells Fargo's chair and another board member recently resigned in response to congressional anger over the sham accounts and auto insurance scandals. Wells Fargo representatives were also called before Congress.

The sham accounts scandal involved the bank signing customers up for checking accounts, credit cards and debit cards with neither their knowledge nor consent. Some of these customers were then assessed fees and penalties, including overdraft fees from linked accounts, monthly service fees for failing to maintain a minimum balance, annual credit card fees and interest charges. Bank employees signed customers up using email addresses not belonging to consumers to enroll them in programs without their knowledge or consent. 

The auto loan scandal had a similar character. As part of the terms of its auto loan program, customers had to have insurance. The bank's policy was that anyone taking out a car loan would automatically be signed up for insurance if they didn't already have it. The problem, however, was that the bank was signing people up for insurance even if they already had coverage from another company, and these policies were generally more expensive than the ones customers had already obtained on their own. As a result, 274,000 Wells Fargo customers went into delinquency, and almost 25,000 had their cars wrongfully repossessed. 

Further investigation by the House on the matter found that not only was Wells Fargo taking a cavalier attitude toward the scandal, but that some regulators knew about the bank's problems for years yet were completely ineffectual at holding it to account. 

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