10 Shocking Paragraphs From Wells Fargo's Report on Aggressive Selling Practices (2023)

On Monday, Wells Fargo released a 113-page report into a board committee's investigation into the company's sales practices, and the bank announced it had recovered an additional $75 million in compensation from two executives.

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FuGuo-BankWorld Financial Center, +0.81% Recovering $28 million in compensation from former CEO John Stumpf and $47 million in stock options from Carrie Tolstedtwho run the so-called community banks. With additional kickbacks, the company recouped nearly $183 million from Stumpf, Tolstedt and other executives. Wells Fargo was fined $185 million by regulators and has been the subject of two congressional investigations, including for unauthorized opening of millions of customer accounts.

Here it issome paragraphs in the reportCurrent chief executive Tim Sloan said he accepted the offer as part of a "journey to restore confidence".

• Tolstedt and certain people close to her are isolated and defensive and do not like being challenged or hearing negative information. Even senior leaders in the community banking sector are often afraid or discouraged from voicing opposing views. Torstedt effectively faced and resisted control both inside and outside the unit. Not only have she and her Group Risk Officer failed to expand the issue beyond the community bank, but they've worked hard to prevent it by withholding information from the board about the number of employees being sued for violations, among other things had been dismissed for selling practices.

• By the end of 2015, Wells Fargo's control function generally viewed sales abuse as a relatively insignificant problem, equating to a tolerably low number of violations or victimless crimes. Part of this inadequate response to sales practice issues is the misperception, lasting until 2015, that wrong practices do not cause "customer harm," a term that has itself been narrowly construed to mean only fees and financial losses such as fines. This flawed view makes it easy to underestimate the risk to Wells Fargo's brand and reputation of being discredited through misuse of customer information and improper sales practices.

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"I really feel for Carrie and her team. We have done a great job here.”

– Former CEO John Stumpf, 2015, comments on whether the bank is forcing products on customers

• Leap into January, a program created in 2003 to motivate employees to "start the year stronger by meeting and exceeding January goals." The community bank imposed higher daily sales targets on bankers in January, highlighting and rewarding higher levels of selling activity. While many eyewitnesses felt that the initial impetus for the campaign was appropriate, eyewitnesses almost unanimously agree that over time the campaign became distorted and became a breeding ground for bad behavior, helping to establish a negative selling culture. Witnesses recalled that bankers were encouraged to create prospect lists of friends and family members who were likely to meet January sales targets, and that December account opens were often "sandbagged" (temporarily held) until January to meet sales targets and incentives . Activity-related stress manifests itself in a higher incidence of substandard accounts, as evidenced by the "funding rollover rate," a quality metric used by the community banking sector to track its customers' "funding" rates (multiple sites aat the lowest limitdeposit into a new checking or savings account.

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• Shelley Freeman, Los Angeles regional president and later Florida chief regional president, was particularly aggressive in her “Jump into January” campaign. Witnesses described the practice of a "running competition" in which district leaders dressed in themed clothing lined up in two lines. Then everyone runs to the whiteboard, where they report on the sales achieved. Witnesses also said that Freeman encouraged his subordinates to encourage customers to register products whether they wanted to or not.

A branch manager has a teenage daughter with 24 accounts, an adult daughter with 18 accounts, a husband with 21 accounts, a brother with 14 accounts, and a father with 4 accounts.

— Discovery of abuse of bank accounts for "friends and family".

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• Accounts for “friends and family” were also frequently mentioned in the investigative documents examined; Employees often reported opening accounts for family and friends to meet sales goals. For example, a branch manager has a teenage daughter with 24 accounts, an adult daughter with 18 accounts, a husband with 21 accounts, a brother with 14 accounts, and a father with 4 accounts.

• In some records reviewed, employees entered incorrect customer phone numbers or substituted customer phone numbers with their own email addresses to prevent Wells Fargo from contacting customers who might not have performed well on the customer survey. In one instance, a store manager spoofed customer phone numbers and instructed her staff to do the same, resulting in at least 192 customer phone numbers being removed to circumvent customer reconciliations.

• It was not until 2015 that regional leadership was able to successfully address concerns about secondary checking accounts. This year, a district leader wrote an email about the removal of secondary accounts from the incentive compensation plan, saying he and other district leaders should "fight for good" every year — mostly because I think one day we'll be asked , why that is part of the targeting process. "

• Group Risk Officer Claudia Russ Anderson minimizes and whitewashes issues in community bank reporting, including sales practices. Beginning in late 2011, Russ Anderson challenged the wording of the corporate security section of the report to the bank's Audit and Inspection Committee. In a 2012 email exchange, Michael Bacon, the company's security chief and head of internal investigations, said Russ Anderson "regularly challenged the wording of [d]audit and CS A&E reports," but until then he was to "It's good to respond to that." with a credible challenge." Bacon noted that "our data continues to highlight a worrying trend in the area of ​​sales integrity - from an increase in EthicsLine reports to an increase in administrative complaint letters" and that "confirmed fraud has increased, so we need to keep escalating." This problem has something to do with senior management." Russ Anderson told him that his reporting made the problem "appear to be much worse than it actually was."

• Ironically, in a 2004 email to Stumpf, Tolstedt acknowledged the importance of developing compensation plans so that they incentivize appropriate behavior. Specifically, she noted, "I think you have to balance cross-selling with the right incentives and other things to make sure you have quality cross-sells. Many banks...design products that encourage bad selling.” They encourage their salespeople to sell a second account for free, sell multiple savings accounts for free, etc. Then when you incentivize a team of bankers just sales per day, you demand Trouble.” Tolstedt recognizes the need to balance—measure sales, household penetration and household profitability and develop a balanced incentive plan based on units and profits. "If you're just looking at one metric and not building an integrated model, you're looking for low-value, poorly-funded cross-sell offers that don't drive revenue growth or customer retention."

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• Even in 2015 and 2016, Stumpf was unaware of the scale and severity of the problem. He then publicly supported the adequacy of Wells Fargo's sales goals, emphasizing that the vast majority of Wells Fargo employees are "doing it right." One example is an email Stumpf wrote to Sloan on May 17, 2015, following the Los Angeles Attorney's complaint: "I worked with Carrie over the weekend in Los Angeles — I really feel for Carrie and her team. We have done good things.” I will fight against it. You know what, we only have about 1% of people who lose their jobs playing the system and about 2/3 of those are busy playing the system monitor, so changing the phone numbers etc. The truth is far from imposing products on customers. Regardless, justice prevails and we were right. Some people got it wrong - you bet that's how life is. It's not systemic.”


What is the Wells Fargo cross-selling scandal summary? ›

The Wells Fargo fake accounts scandal first came to light in 2016, when it was revealed that the bank had been creating fake accounts in the names of its customers without their knowledge or consent. The fake accounts were created by bank employees who were under pressure to meet unrealistic sales targets.

What is the Wells Fargo sales Practices scandal? ›

The CFPB fined Wells Fargo $100 million on September 8, 2016, for the "widespread illegal practice of secretly opening unauthorized accounts." The order also required Wells Fargo to pay an estimated $2.5 million in refunds to customers and hire an independent consultant to review its procedures.

How did Wells Fargo mistreat customers? ›

Wells also created PINs to activate unauthorized debit cards, transferred money from customer accounts to unauthorized accounts (a practice known internally as "simulated funding"), opened credit cards and bill pay products without authorization, altered customers' contact information to prevent them from learning of ...

Which unethical behaviors were said to have happened at Wells Fargo? ›

The bank opened at least 3.5 million fraudulent accounts for unwitting customers, according to researchers at the Harvard Business School.

How did the Wells Fargo scandal affect customers? ›

More than four years after the Wells Fargo (WFC) fake-accounts scandal erupted, the bank reported Friday another $321 million of quarterly losses tied to customer refunds. That brings Wells Fargo (WFC)'s 2020 total for what it calls customer “remediation” to a staggering $2.2 billion.

What unethical banking practice was Wells Fargo accused of? ›

Under pressure to meet steep sales goals and incentives, Wells Fargo employees created over a million fraudulent accounts in their customers' names. If playback doesn't begin shortly, try restarting your device.

What did Wells Fargo do that encouraged unethical actions? ›

Rather than put its customers first, Wells Fargo built and sustained a cross-selling program where the bank and many of its employees served themselves instead, violating the basic ethics of a banking institution including the key norm of trust.

Who was the whistleblower in Wells Fargo? ›

When the Wells Fargo banking scandal erupted nationally in 2016, amid allegations that bank employees were encouraged to open credit card accounts for customers without their knowledge, leading to even larger, systemic fraud, Jessie Guitron was at home saying "I told you so."

How many customers left Wells Fargo after the scandal? ›

Since the breaking of the fake account scandal on September 8, the Wells Fargo Mobile app has seen both adoption (in terms of downloads) and retention fall, resulting in up to 140 thousand additional users abandoning the app on a week-to-week basis.

What is the most recent Wells Fargo scandal? ›

Wells Fargo paid $3 billion in February 2020 to settle federal civil and criminal probes, admitting at the time that it pressured employees between 2002 and 2016 to meet unrealistic sales goals, which led them to open fake accounts for customers.

What did Wells Fargo violate? ›

Key Facts. Wells Fargo is accused of allowing an unnamed foreign bank to process $532 million worth of prohibited transactions on its Eximbills financial platform from 2010 to 2015, the Federal Reserve Board said in an announcement.

Did Wells Fargo compensate customers? ›

The settlement includes more than $2 billion in reparations to customers who suffered financial losses and an additional $1.7 billion that will go to a victims' relief fund as part of a civil penalty.

Did Wells Fargo admit wrong doing? ›

In its latest news release, Wells Fargo congratulated itself for securing the termination or expiration of four earlier consent orders reached with the CFPB and the comptroller of the currency. In none of them did the bank admit or deny the allegations, though it did pay millions of dollars in penalties.

Who is to blame for the Wells Fargo scandal? ›

Former Wells Fargo Executive to Plead Guilty in Sham Accounts Scandal. Carrie L. Tolstedt, who ran the bank's retail branches, faces up to 16 months in prison for obstructing a bank examination.

What did Wells Fargo employees do wrong? ›

As part of the deal, Wells Fargo admitted that between 2002 and 2016 it pressured employees to meet “unrealistic sales goals that led thousands of employees to provide millions of accounts or products to customers under false pretenses or without consent, often by creating false records or misusing customers' ...

How many fake accounts did Wells Fargo create? ›

That brings the total to 3.5 million potentially fake accounts — two-thirds more than the 2.1 million the bank had previously acknowledged.

Can you trust Wells Fargo? ›

Yes, all Wells Fargo accounts are FDIC insured (FDIC certificate No. 3511) up to $250,000 per depositor, for each account ownership category, in the event of a bank failure.

What is the Wells Fargo discrimination scandal? ›

A 2022 Bloomberg News investigation found that Wells Fargo rejected half its Black applicants during the mortgage refinancing boom. Among major lenders, only Wells Fargo approved a smaller share of refinancing applications from Black homeowners in 2020 than a decade earlier, the report said.

Why is this Wells Fargo situation an ethical dilemma? ›

The Wells Fargo situation is an ethical dilemma because it involves a breach of trust between the bank and its customers. The bank created millions of unauthorized accounts for its customers without their knowledge or consent, which is a clear violation of ethical principles.

What was the worst banking scandal? ›

Wachovia Bank

Once one of the largest U.S. banks, Wachovia is unfortunately responsible for the biggest money-laundering event. In 2010, it was found that the bank allowed drug cartels in Mexico between 2004 and 2007 to allow money laundering of close to USD 390 billion through its branches.

Did Wells Fargo violate the Sarbanes Oxley Act? ›

The Occupational Health and Safety Administration (“OSHA”) levied a hefty penalty on Wells Fargo on September 1, 2022, for its violation of the Sarbanes-Oxley Act (“SOX”).

What changes did Wells Fargo make after the scandal? ›

In his opening remarks, Sloan said his company has done away with high-pressure product sales targets that encouraged workers to open unauthorized accounts. The bank has also shaken up its board of directors and improved wages and benefits for its workers, Sloan said.

How did leadership at Wells Fargo fail to create an ethically driven culture? ›

Former Wells Fargo CEO John Stumpf failed in this responsibility by allowing illegal and unethical practices to occur over a multi-year period within the bank's Community Banking Division. This was driven by relentless pressure to achieve unrealistic sales goals to meet bonus targets.

What are Wells Fargo ethical business practices? ›

I.Wells Fargo's Approach2
II.Serve Wells Fargo's Best Interests2
III.Act with Honesty, Integrity, and Trustworthiness3
IV.Preserve Confidentiality5
V.Avoid Conflicts of Interest7
3 more rows

What happened to Wells Fargo whistleblower? ›

The Chicago area-based manager, who worked in commercial banking at Wells Fargo, was fired after voicing repeated concerns about what they believed to be violations of financial law – including allegations of wire fraud, price fixing and being instructed to falsify customer information, the Labor Department said.

Did Wells Fargo have a whistleblower policy? ›

Wells Fargo is committed to ensuring that all disclosers do not suffer detriment because they speak up. The protections offered will be determined by Wells Fargo and depend on things such as the Potential Misconduct and people involved.

What is Wells Fargo's Code of Ethics? ›

Wells Fargo does not tolerate unethical behavior. We are all responsible for our actions and the decisions we make, and we must hold each other accountable for the outcomes of those actions and decisions.

What was Wells Fargo's strategy for recovering from this scandal? ›

Restoring Trust

As it was mentioned earlier, the resulting scandal prompted Wells Fargo to change their approach and pay penalties for their illegal activity. The bank's subsequent promise to focus on serving the client rather than selling products to them was an appropriate strategy and could potentially be effective.

How many employees does Wells Fargo laying off? ›

Wells Fargo said it almost 11,000 fewer employees at the end of 2022 than in 2021.

Who owns Wells Fargo? ›

Wells Fargo & Co (NYSE:WFC)

Institutional investors hold a majority ownership of WFC through the 74.64% of the outstanding shares that they control. This interest is also higher than at almost any other company in the Major Banks industry.

Who was fired from Wells Fargo? ›

Could get 16 months in prison. Carrie Tolstedt, who played a lead role in the Wells Fargo & Co. fraudulent customer account scandal, is the first former or fired executive heading to federal prison over the events.

How much money has Wells Fargo been fined? ›

The Federal Reserve Board on Thursday announced that it has fined Wells Fargo & Co., of San Francisco, California, $67.8 million for the firm's unsafe or unsound practices relating to historical inadequate oversight of sanctions compliance risks at its subsidiary bank, Wells Fargo Bank, N.A. Wells Fargo & Co.'s ...

Did Wells Fargo fine $100 million? ›

The US Federal Reserve Board and the Treasury announced fines Thursday for Wells Fargo bank totaling almost $100 million for enabling sanctions violations worth more than half a billion dollars over five years.

Did Wells Fargo have a breach? ›

A Wells Fargo bank access code was used to steal the personal information of roughly 5,000 consumers, leading the bank to conduct a full-scale inquiry into the data breach.

Has Wells Fargo been sued for discrimination? ›

A class action lawsuit is accusing Wells Fargo of racism for denying mortgage loans to non-white applicants. Former San Francisco Mayor Willie Brown also joined the fight Wednesday.

How much did Wells Fargo dispute cost? ›

What Is Wells Fargo's Chargeback Fee? When serving as a payment processor for merchants, Wells Fargo charges a $25 fee for each chargeback. They also reserve the right to recoup fees levied by other institutions involved in the dispute.

How did Wells Fargo survive the financial crisis? ›

This pushed Wells Fargo Bank into the 3rd largest bank in the United States by market capitalization. Wells Fargo did this by focusing in the San Francisco and New York city markets. Wells Fargo had continued to take advantage of the slowed down market and was able to profit during the recession.

Does Wells Fargo owe customers money? ›

Here's What You Should Know. Millions of Wells Fargo customers are in line for relief money after the government found the banking giant violated a host of federal consumer laws between 2011 and 2022. Regulators at the Consumer Financial Protection Bureau have announced how account holders can collect some of the cash.

What is cross-selling and how was it used at Wells Fargo? ›

A core part of this sales model was the “cross-sell strategy.” As described externally, the cross-sell strategy called for Wells Fargo to meet all of its customers' financial needs by focusing on selling to its existing customers additional financial products that those customers wanted, needed, and would use.

How much money was lost in the Wells Fargo scandal? ›

' Following Wells Fargo's $3 billion penalty over a financial scandal, the bank reported a 50% loss in profit for the fourth quarter.

What is a good example of cross-selling? ›

Cross selling examples
  • A fashion website suggesting products with a “customers also bought” feature.
  • A server asking restaurant customers if they would like a side salad or appetizer.
  • A pop-up on a fashion website with compatible products to put together a full outfit.

What is the reason for cross-selling? ›

Cross-selling involves selling customers related items when they are making a purchase. It's important not only because it boosts revenue, but also because it increases customer satisfaction, builds engagement, and helps to create solid and lasting customer relationships.

How much are people getting from Wells Fargo lawsuit? ›

For mortgage holders that were unable to modify their mortgages to avoid foreclosure, damages average $24,125 per claimant. For deposit accounts, customers average $100 in damages.

Did Wells Fargo pay $3.7 billion for illegal conduct that harmed customers? ›

The settlement, which includes the largest fine ever imposed by the Consumer Financial Protection Bureau, allows the bank to resolve claims that it had harmed millions of consumers since 2011.

What punishment did Wells Fargo get? ›

The Federal Reserve and Treasury Department fined Wells Fargo $97.8 million on Thursday for allowing a foreign bank to make hundreds of millions of dollars in transactions that were prohibited under U.S. sanctions laws, the latest multi-million-dollar penalty from regulators to hit Wells Fargo in recent years.

Did anyone go to jail for the Wells Fargo scandal? ›

Carrie L. Tolstedt, Wells Fargo's former head of retail banking, agreed to plead guilty to a criminal charge of obstructing a bank examination, the Justice Department said on Wednesday. The crime carries a maximum sentence of five years in prison.

Is Wells Fargo a safe bank now? ›

Fortunately for consumers, there are thousands of financial institutions that are FDIC-insured, including Wells Fargo. FDIC insurance limits cap at $250,000.

How did Wells Fargo change after the scandal? ›

Wells Fargo quickly became the poster child for financial misconduct as its stock price dropped. Customer and government trust in the firm hit an all-time low. In addition to the millions of dollars Wells Fargo spent to clean up the scandal, new customer checking accounts and credit card applications plummeted.


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