The bad news for Wells Fargo CEO John Stumpf keep getting worse. As we reported last week, Stumpf is expected to testify before Congress this week in response to allegations that the bank allegedly opened over two million phony accounts without customers’ approval. The Senate Banking Committee has summoned John Stumpf, chief executive of Wells Fargo & Co., to testify about the bank’s alleged sales-practices misdeeds after it agreed last week to pay a $185 million fine and enter into an enforcement action with regulators. Mr. Stumpf told The Wall Street Journal in an interview Tuesday that he is prepared to “share Wells Fargo’s story” at the hearing.
His testimony will be the first from a big-bank chief under fire since 2012. Back then, the committee brought in J.P. Morgan Chase & Co. chief James Dimon to explain his bank’s “London whale” trading losses, in which the company lost more than $6 billion.
Then, over the weekend we learned America’s largest mortgage lender and until recently the largest bank by market capitalization, was sued on Friday by customers who accused the bank of fraud and recklessness for its behavior.
Wells Fargo CEO John Stumpf speaks at the Bay Area Council Outlook Conference
The lawsuit, as reported by Reuters, was filed in the U.S. District Court in Utah, and seeks class-action status on behalf of hundreds of thousands of customers nationwide. In the complaint, three plaintiffs said customers were hurt by “abusive and fraudulent tactics” used by employees who felt they had to “do whatever it takes,” including selling products they did not need or want, to meet sales quotas.
It was not immediately clear how the three named plaintiffs were specifically harmed by the bank’s alleged wrongdoing.
Last week, the San Francisco-based lender agreed to pay $190 million to settle regulatory charges that employees opened some 2 million accounts without customers’ knowledge, in order to meet sales targets. Adding to the outrage, it was also revealed last week that the person in charge of the consumer products group, Carrie Toldstedt, would retire from the bank with a total package of up to $125 million.
John Stumpf has cultivated the image of his San Francisco bank as being apart from the Wall Street, big-bank crowd. And he himself is hardly a household name, even if he was among the country’s top-paid bankers, earning total compensation of $19.3 million in 2015. It remains to be seen if he will be handled with kiddie gloves as was the case with Jamie Dimon’s tesimony in 2012, or if he will actually be brought to task for the biggest consumer fraud perpetrated by a US bank in years.