By: The Associated Press , Ken Sweet//November 3, 2016
By: The Associated Press , Ken Sweet//November 3, 2016//
The San Francisco-based bank has been under fire since it was discovered that in order to meet extremely lofty sales goals, employees opened as many as 2 million bank and credit card accounts without customer authorization.
Wells Fargo has confirmed that the Securities and Exchange Commission is investigating its sales practices and revealed that it has almost doubled to $1.7 billion the amount set aside to deal with its legal problems.
The bank said in a regulatory filing Thursday that a myriad of local, state and federal government agencies are investigating Wells for its sales practices scandal. That’s on top of class-action lawsuits filed against the bank by investors, its former employees and customers.
Due to its mounting legal woes, Wells Fargo is also boosting the amount of money it has set aside for legal expenses from the $1 billion it had set aside as of June 30.
The San Francisco-based bank has been under fire since it was discovered that in order to meet extremely lofty sales goals, employees opened as many as 2 million bank and credit card accounts without customer authorization. The company had also fired more than 5,000 employees, the vast majority of them lower-level workers.
The biggest scandal in the bank’s 164-year history forced the abrupt retirement last month of its CEO, John Stumpf, after the board reclaimed $41 million in compensation. The company named as its new CEO Tim Sloan, who has made fixing the bank’s reputation his top priority.
Sloan held an “all-hands” meeting with employees last month where he apologized directly to the bank’s front-line workers. Wells has also launched an advertising campaign to apologize to customers. The bank is also fighting off angry politicians, both Republican and Democrat, who in a tense election year have make an example of Wells Fargo.
“I know there is a lot we need to get right and team members throughout the company are focused on doing the hard work that is necessary to restore trust in Wells Fargo,” Sloan said in prepared remarks at an investor conference in Boston on Thursday.
Sloan said Wells will also now provide updates on the activity inside its branches on a monthly basis.
When Wells reported its third-quarter results last month, there were some early signs that customers were pulling back their business with the bank. Wells reported double-digit percentage drops in bank account openings, as well as declines in bank branch traffic. Wells employees have said, since the scandal, that they are sometimes spending their entire work days closing customer accounts.
While acknowledging the decline in branch traffic, Mary Mack, the new head of consumer banking at Wells, told investors Thursday that “It is still too early to gauge the longer term impact on these business trends.”
But the bank’s legal woes clearly are nowhere close to being over. Along with the disclosure about the legal issues regarding its sales practices, Wells also disclosed it is in talks with state and federal regulators over its practices tied to the housing bubble and subsequent financial crisis. Known as the Working Group of the Financial Fraud Enforcement Task Force, it is the group of regulators that have been reaching multibillion settlements with major financial companies like Bank of America, JPMorgan Chase and Goldman Sachs.