In a September 2016 Senate hearing, Sen. Elizabeth Warren grilled Wells Fargo CEO John Stumpf about the bank’s strategy of cross-selling – selling additional products to existing customers, such as mortgages or credit lines – and how this strategy ultimately led to an ongoing investigation and millions in fines levied by the Consumer Financial Protection Board, with more likely to come.
At the heart of Sen. Warren’s grilling was how Stumpf presided over a company culture that encouraged unethical cross selling, in which thousands of employees opened accounts on customers’ behalf, without authorization, in order to meet quotas.
Wells Fargo’s legal woes continue
But the CFPB wasn’t the only governmental entity to get involved: Los Angeles wrangled a “blockbuster settlement” out of Wells Fargo, as the Los Angeles Times reports.
The latest news is a class action brought by employees who claim Wells Fargo demoted or even terminated them because they failed to engage in the unethical side of cross selling.
Of course, it’s hard to characterize Wells Fargo’s trouble as true “legal woes,” because these fines are a proverbial drop in the bucket on the bank giant’s balance sheet.
What do they care if a few people get hurt on the way to massive profits?
Sen. Elizabeth Warren’s grilling
As Sheelah Kolhatkar writes for the New Yorker, “the episode” (referring to the Senate hearing) “seemed designed to remind the public that, almost exactly eight years after the collapse of Lehman Brothers and one of the worst financial crises in history, very little about the unrestrained, incentive-driven banking culture that caused so many problems has changed.”
Indeed, it seems that very little has changed, which is why Warren was the best woman for the job of grilling Stumpf at the Senate hearing, in which she said, “You should resign. You should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission.”
Prior to entering politics, Warren was a prominent scholar in the field of bankruptcy law, and was one of those who opposed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which made it harder for consumers to file bankruptcy (a fact at odds with its quasi-sympathetic title).
What we know
In short, the estimated 1.5 million unauthorized accounts opened under Wells Fargo customers’ names generated the usual problems every hardworking person hates: fees. These were interest fees, annual fees, overdraft fees, etc. – an estimated $400,000 in fees taken out against 14,000 account holders, according to CNN.
So, while Wells Fargo CEO John Stumpf makes millions while presiding over the same spirit of fraud that led to the Great Recession, your average consumer loses once again.