Wells Fargo’s response to the Fake Accounts Scandal
Once the information was out in the open that employees of Wells Fargo were opening accounts on behalf of customers without their knowledge, consent and permission, as well as applying for credit cards on their behalf. The bank knew from the get go that it was going to suffer for at least the next 1 to 2 years. That is to say the least. Depending on how the bank handles what it is going through nowadays, the repercussions can go on to bother Wells Fargo for many many years. They say that the strongest of people are judged not on their failures, but how they react to their failures. So how did Wells Fargo react to this scandal?. Well they started by taking quick and decisive action. Wells Fargo conducted a full investigation of their own, in their own ranks. They searched through all their employees and ranks. They found out who was relevant and related to the scandal in any sort of way and fired all of them. On record, The financial services bank said that the terminations have amounted to 5300 bank employees. Personally, I believe that the number is larger than that and the terminations will continue to increase as time goes on and more employees are found guilty of partaking in this scandal.
In monetary terms, Wells Fargo just recently agreed to pay 110 Million USD to settle a class-action lawsuit for up to 2 million accounts its employees had opened for customers without their consent, knowledge and permission. This happened as of recently, Tuesday March 28th of 2017 to be exact. It comes after Wells Fargo already payed 185 Million USD to federal and California authorities towards the end of last year as a result of the scandal. Think of the 185 Million USD as a fine towards the authorities and the 110 Million USD as a settlement to the customers. March 28th of 2017 was a big day for the bank to solve some of the biggest issues created as a result of the scandal. On the same day, they fired four upper management executives which were found to be relevant and related to the scandal directly or indirectly.
After firing 5300 lower level employees and four higher level executives, as well as, paying millions in fines and settlements, Wells fargo decided to fix what they did wrong and fix the root of this huge scandal in the first place, which was the sales quota. The sales quota which was assigned to employees is what caused this entire scandal in the first place. The employees just decided to do what they had to do to reach their targets and keep their jobs. Wells Fargo did eliminate their harsh sales quotas soon after they were investigated by the authorities. Now, the business must go on, however, it has been reported that the bank is struggling massively in tying down new businesses/startups and growing revenue. The bank said it plans to close at least 400 branches by the end of 2018.
John G. Stumpf, the chief executive of Wells Fargo was taken to court. The main problem which is still going on nowadays as a result of the scandal is that the more research authorities and investigators do on Wells Fargo, the more fraud, and dirt is being found on them on separate occasions. In a separate lawsuit, Wells Fargo agreed to pay $4 million to settle a Justice Department investigation which involved improper seizures of vehicles owned by soldiers and serviced and active servicing military who fell behind on their loans. To respond to that dilemma, Fargo said “In those instances where some service members did not receive the appropriate benefits and protections, we did not live up to our commitment and we apologize,”, “We have been notifying and fully compensating customers and will complete this work in 60 days.” (https://www.nytimes.com/2016/09/30/business/dealbook/wells-fargo-ceo-john-stumpf-house-hearing.html).
Back to the Fake Accounts Scandal, Mr. Stumpf apparently stuck to his usual script and blamed the scandal on all the 5300 lower level employees which have been fired. To conclude in court, he did apologize repeatedly. He did admit to accepting and taking full responsibility for everything related to the scandal and it’s repercussions. Lastly, he admitted that the company should have done “should have done more sooner” (https://www.nytimes.com/2016/09/30/business/dealbook/wells-fargo-ceo-john-stumpf-house-hearing.html).
Now this was the CEO, the company is really doing much of the same. They are taking full responsibility of the scandal. Whatever the authorities, both federal and state are telling them to pay, they are paying. They were also extremely quick in solving the roots and causes of the scandal by terminating the 5300 employees and by fixing their sales quotas.
Personally, I have respect for what the company is doing. They are taking all the repercussions and heat head on. As a complete company, they knew that they were going to have to pay a lot of money and comply with the authorities completely to minimize the damage this scandal will have on their reputation. They knew that this was going to damage their reputation and business, once they got stuck, they decided to fight it head on and try their best to minimize the damage that this will have on them collectively.
Sources for Part 3: