Wells Fargo has agreed to a 575 million dollar settlement with U.S. states, the most recent in a series of penalties against the bank that have so far totalled over 2 billion dollars. The agreement is the latest step in efforts by the bank and its implicated CEO to free themselves from legal troup and remove an asset cap imposed by the Federal Reserve last February.
The spiral began two years ago, when the bank agreed to pay 190 million to the federal government for charges that it had created millions of fake accounts in customers’ names, without their knowledge or permission. The scheme also included unwittingly enrolling customers in online banking services. Since then, Wells Fargo has been accused of exploiting customers by a variety of means: charging auto loan customers for unnecessary collateral protection insurance, improperly referring them for life insurance policies, ignoring due refunds, and charging customers for deceptive mortgage rate lock extension fees.
The suit, which follows another billion-dollar settlement with the federal government earlier this year, was brought by attorneys general for all 50 states as well as the District of Columbia. “Wells Fargo customers entrusted their bank with their livelihood, their dreams, and their savings for the future,” said California Attorney General Xavier Becerra in a statement after the settlement was announced. “Instead of safeguarding its customers, Wells Fargo exploited them, signing them up for products — from bank accounts to insurance — that they never wanted.”
In a press release, the company said that it was “remediating affected customers” in the wake of the settlement, but did not outline how it had contrived to do that. Instead, it said that it had agreed as part of the lawsuit to maintain a website describing those efforts and the issues they were supposed to address. “This agreement underscores our serious commitment to making things right in regard to past issues as we work to build a better bank,” said CEO Tim Sloan, whose quote in the release was the only admission of responsibility.
Industry analysts and outraged customers alike were surprised that Sloan kept his position, after more than twenty other corporate officers involved in the scandals announced their resignations. As every successive detail of the bank’s widespread illegal activity has come to light, Sloan has been at the center of very public calls for his removal — not least of which came from Democratic Senator Elizabeth Warren, who sits on the Senate Banking Committee.
“At best you were incompetent, at worst you were complicit, and either way you should be fired,” she said to the CEO during a congressional hearing earlier in 2018. “The Federal Reserve should remove all of the current board members who served during the fake account scam,” she went on. The senator also sent a letter to the Fed outlining her demands and concerns.
In response to the various revelations of criminal activity at the bank, in February 2018 the Fed imposed an indefinite asset cap on Wells Fargo, preventing the bank from continuing to grow until it had rooted out the causes of the and reformed its risk management policies to prevent further issues from occurring. In practice, this meant that the had to freeze its 1.95 trillion dollars in assets and institute a new series of checks on corporate officers. According to Reuters, the bank is months behind schedule on submitting that reform plan to the Fed, an offense that Warren noted in her letter as further cause for the organization to demand a purge of corporate officers, including Sloan.
In late November, Federal Reserve Chairman Jerome Powell confirmed the Wells Fargo’s failure to institute sufficient reforms in a letter to Senator Warren, and assured her that the asset cap would remain in place. “We do not intend to lift the asset cap until remedies to these issues have been adopted and implemented to our satisfaction,” he wrote. Wells Fargo executives say they believe that will be sometime in the first half of 2019. Powell did not, however, say that the Fed would demand that Sloan be fired from his position.
The Wells Fargo board, has maintained its support for the CEO throughout the period of internal crisis, going so far as to award him a 35 percent raise in 2018. Sloan, in turn, has insisted that he plans to continue his 30-year career at the company, and rejected the criticisms lobbed at him by Senator Warren. “It’s not surprising I disagree with almost everything Elizabeth Warren says,” he said in March.
Last summer, the bank sought to refurbish its damaged brand through a marketing campaign announcing the “re-establishment” of Wells Fargo in 2018. A commercial titled “Earning Back Your Trust” struck an overwrought and uncomfortably apologetic tone for a corporate marketing effort, one that reminded all too vividly of BP’s infamous “I’m sorry” ad in the wake of the gulf oil spill: “We always found the way, until…we lost it. But that isn’t where the story ends, it’s where it starts again.” Needless to say, these empty efforts at rebranding didn’t have much staying power, and the overall damage that Wells Fargo inflicted on itself was most evident in the 25 percent dip in its stock price over the course of the year.