Wells Fargo’s new CEO Tuesday faced withering criticism from a Senate panel for the bank’s handling of a 2016 scandal in which the bank acknowledged it had created millions of fake accounts in customers’ names.
The scandal is a year old, but from the bipartisan lambasting of its behavior, it was clear the matter is far from settled for the Senate Banking Committee.
“At best you’re incompetent, at worst you were complicit,” said Sen. Elizabeth Warren, D–Massachusetts. “Either way you should be fired.”
“What in God’s name were you thinking?” demanded Sen. John Kennedy, R–Louisiana.
Sen. Sherrod Brown, D–Ohio, the ranking member on the panel, said that the company “went to great lengths to bury this scandal.”
“It subjected customers to forced arbitration, preventing them from their day in court, further concealing the fraud,” he said. “Employees who tried to alert senior management to the treatment of Wells Fargo’s customers were silenced or fired.”
Although the verbal onslaught came from both sides of the political aisle, Democrats were particularly irate about reports that the bank forced those who had false accounts created in their names into arbitration rather than being given the option to sue.
That fight reflects a larger one over a rule imposed last year by the Consumer Financial Protection Bureau, a federal watchdog headed by former Ohio Attorney General Richard Cordray. The rule bars banks from including clauses in contracts that force customers into arbitration rather than giving them the option to sue. In July, the House voted to overturn the rule. The Senate has yet to vote on it.
Brown argues that denying customers a day in court gives an unfair advantage to Wells Fargo. During the two-hour hearing Tuesday, he asked Wells Fargo CEO Tim Sloan to commit to “quit using forced arbitration.”
“No, I won’t, senator,” Sloan replied, saying the bank has made “fundamental changes” aimed at better satisfying customers.
Later, however, Sloan insisted that the company did not require those with the fake accounts to enter arbitration, insisting instead that the company invited customers to “come in and see us.”
“Will you commit to not use forced arbitration on accounts that were not authorized by the customer?” Sen. Jon Tester, D–Montana, asked.
Sloan said the company would not used forced arbitration on such customers.
Sloan apologized for “letting down our customers and our team members,” and said the company has provided some $142 million to those harmed by the fake accounts, in addition to paying attorneys’ fees and administrative costs.
“We are issuing refunds to every affected customer who has responded or has been identified by third party review,” he said.
Some senators sounded skeptical.
“Wells Fargo is not going to change with you in charge,” said Warren.
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