Last year we took a close look at how Wells Fargo fostered a culture of fraud that encouraged employees to open unauthorized credit and debit card accounts for customers. Investigators at the time estimated the bank had created more than 1.5 million fraudulent accounts, leading Wells Fargo to fire thousands of employees. Further inquiries from Congress also caused the company to replace managers and roll back executive pay as part of an overhaul of its retail division. The scandal cost Wells Fargo a lot of money as well, including a $185 million fine from the Consumer Financial Protection Bureau and $10.7 million in customer compensation.
The bank appeared to have endured the worst of this controversy until an independent investigation released its findings last week. After reviewing more than 165 million credit and debit accounts, researchers discovered an additional 1.4 million accounts that employees had possibly set up without customer authorization. This would bring the total number of fraudulent accounts to approximately 3.5 million, prompting the company to readdress the scandal. “Today’s announcement is a reminder of the disappointment that we caused to our customers and stakeholders,” said CEO Tim Sloan. “We apologize to everyone who was harmed by unacceptable sales practices that occurred in our retail bank.”
Some critics aren’t moved by the company’s apologies, though, and want regulators to turn their sights on Wells Fargo once again. “New data should cause some lawmakers to re-engage on the issue,” said Isaac Boltansky, an analyst at Compass Point Research & Trading. Still, legislators could choose to address this problem in a number of ways. While some might argue that banks should face tighter regulation, others could claim that the Consumer Financial Protection Bureau needs to be changed since it failed to discover the scandal. Whichever way regulators decide to tackle the issue, it’s likely not going to end in good press for an embattled Wells Fargo.
Questions:
- Should regulators impose further fines on Wells Fargo after recently discovering 1.4 million more fraudulent accounts?
- How do you think government regulators can prevent scandals like this from happening in the future?
Source: Laura J Keller, “Wells Fargo Boosts Fake-Account Estimate 67% to 3.5 Million,” Bloomberg, August 31, 2017. Photo by Ildar Sagdejev.