Wells Fargo has agreed to pay a settlement of $190 million for its part in up to 2 million phony accounts set up without customers’ OK, but the Big Bank admitted no wrongdoing to the Consumer Finance Protection Bureau (CFPB) and fired about 5,300 employees — most of them making about $12 an hour.
However, two ex-Wells Fargo workers filed what could be the first of many class-action lawsuits, accusing Wells Fargo (WF) of unlawful business practices, and failure to pay wages, overtime and penalties.
“If one of your tellers took a handful of $20 bills out of the cash drawer, they’d probably be looking at criminal charges for theft,” said U.S. Sen. Elizabeth Warren, the Massachusetts Democrat to Wells Fargo CEO John Stumpf during a Senate Banking Committee hearing. “They could end up in prison.
“But you squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket,” she continued. “You should resign. You should give back the money that you took while this scam was going on, and you should be criminally investigated.”
Big Banks have the power to exploit workers’ low pay and lack of job security as weapons against them. They’d save on labor costs, then could compel employees to do bad things. At Wells Fargo, workers were given quotas to set up new credit card, savings or loan accounts — even if customers declined. The unauthorized accounts resulted in customers paying extra fees and facing ruined credit scores as WF racked up more profits.
“Wells Fargo’s trying to blame the 5,000 workers they fired,” said Communications Workers of America (CWA) legislative director Shane Larson. “There is no way that 5,000 workers acted individually.”
The CWA and the Committee for Better Banks coalition are continuing to question how Big Banks operate in the U.S. economy, and such grassroots groups are using tools including the “Take On Wall Street” campaign to call attention to such practices.
Larson said some banks don’t use predatory sales goals, but it’s not uncommon in the financial sector.
In fact, former presidential contender Bernie Sanders, an Independent U.S. Senator from Vermont, said, “Wells Fargo’s abuse of its customers is not an aberration. In April, the bank reached a $1.2 billion settlement with the Department of Justice for ‘reckless’ and ‘shoddy’ underwriting on thousands of home loans from 2001 to 2008.
“In 2012,” Sanders added, “Wells Fargo was fined $175 million to settle claims of discriminatory and predatory subprime lending in black and Hispanic neighborhoods.”
One ex-WF worker, Julie Miller, in a conference call with the coalition, said she was ordered to increase branch sales by more than 35 percent each year through such “cross-selling.”
“When Stumpf blames the frontline workers for the unauthorized accounts, I am disgusted,” she said. “I saw firsthand how the sales goals structure and the pressure to ‘sell at all costs’ came from (the) upper level. Corporate executives designed the sales quota systems and created the culture of harassment and fear when we did not meet them.”
The lawsuit, filed Sept. 22 by Alexander Polonsky and Brian Zahgi, seeks $2.6 billion for WF workers who over the last 10 years tried to meet the unrealistic goals without committing fraud but if they couldn’t they were demoted, forced to quit or fired.
“Wells Fargo knew that their unreasonable quotas were driving these unethical behaviors that were used to fraudulently increase their stock price and benefit the CEO at the expense of the low-level employees,” the lawsuit says.
In Washington, Warren and colleagues grilled Stumpf about what Warren called “a staggering fraud.”
Warren asked for investigations by the Justice Department and other federal agencies. The situation is years old, some said, and is so bad, criticism is bi-partisan.
Wells Fargo — which lists 20 banks and 23 ATMs, plus home-mortgage, banking & investment services, and advisors offices in Illinois, including Atkinson, Bloomington, Canton, Galesburg, Geneseo, Macomb, Monmouth, Peoria, Streator and Woodhull – also was ordered by the CFPB to repay $2.6 million to customers victimized by the scheme. But that’s a pittance compared to corporate revenues and executive compensation. One executive tied to the scheme, Carrie Tolstedt, retired with a $125 million payout, but WF’s board has rescinded unvested equity awards from her ($19 million) and Stumpf ($41 million).
Still, as Adam Davidson commented in New Yorker magazine, “Once again, a Big Bank was caught doing something awful, received a fine, admitted no wrongdoing, and no senior manager was punished.”
Contact Bill at Bill.Knight@hotmail.com