Transcripts For CSPAN2 Senate Banking Hearing On Wells Fargo

Tuesday he gave an update on how wells fargo is addressing past wrongdoing and changing business practices. The searing will come to order. Before we begin let us remember that were still mourning those lives who are lost in our thoughts go to the courageous First Responders who put their lives on the line to save others. Both centers of nevada arse absent today because theyre in nevada. I know that senator heller and cortez are doing all they can there we will be reunited in prayer and support with them during this difficult time. Today will hear testimony from wells fargo chief executive officer. Over a year ago john testified in front of this committee on the bank bank account scandal and his handling of the fallout. Of the many issues emphasized during the Committee Members one was the need to hold executives accountable and to ensure customers impacted will be made whole. He committed the bank would take necessary actions to make it right and restore the public and Investors Trust in the company. Incidents like these remind us how important it is to Institute Policies and procedures that foster customer protection, identify problems and treat customers fairly. Since that hearing they have made changes to the Corporate Structure in an effort to address these concerns. Developments and disclosures at the bank in the last year merit new scrutiny. In august 31 they announced the results of an expanded review of Retail Banking accounts which included those opening january 2009 and september 2016. The phone potentially unauthorized accounts was three and half million instead of 2. 1 million. They discovered problems with its Auto Insurance, or cpi program in selfreported these issues to regulators. In response to complaints received policies purchased on behalf of customers purchased in 2012 or eight and found they be 800,000 customers may have been harmed by the practices. Customers were charged for Car Insurance they did not need. Some had their vehicles wrongly repossessed. For families, having your car repossessed her credit compromised is devastating. These new developments raise questions that must be answered. Including what have they done to ensure customers affected by these issues are or will be made whole . More complex question cases, how is wells fargo working with the other parties to restore Credit Scores and return amounts were customers experience higher borrowing costs . What changes have they made in the last year to address post past issues and new revelations . I what new evidence is there . And as members as last year, what has been the involvement of regulators since the initial incident and in response to the new disclosures . We welcome comments on these matters. Before we get to the testimony, senator brown. I act your comments about the citizens of las vegas and those visitors that lost their lives and were injured in that shooting. Our hearts go out to them and their families, special concern to senators heller, i hope that after every charge at a we say hearts and minds go out to those victims. I hope the senate will actually do something about this for a change. A year ago john stumpf sat in the searing attempting to explain the inexplicable. The banks punitive sales goal have pressured its employees to open over 2 million fraudulent accounts. In written questions they asked mr. Stump if he was confident that this type of fraudulent activity existed and no other part of wells fargo. We asked about products including insurance. On november 15 they responded they believe the activity was issued to certain members within the Community Bank division. Weve learned that the problems are larger and most systemic than originally disclosed, before being forced to come clean wells fargo went to Great Lengths to bury the scandal. Subjected customers to forced arbitration preventing them from their day in court and further concealing the fraud. Employees who try to alert Senior Management there were silenced or fired. In 2013 a california customer sued claiming they had open several on authorized accounts in his name. Wells fargos forced the case out of the courts and into nonpublic arbitration claiming the terms of a real account should govern the fake ones. They forced that out of the claiming the terms that a real account should govern the fake ones. The bank again used its fine print legalese to fight to keep the case under seal, using forced arbitration. Has it changed . Just two months ago they used forced arbitration clause in august of this year they finally disclosed a number of fraudulent accounts 70 higher than originally reported. They revealed and stuck 800,000 customers without insurance policies without telling them or checking to see if they had insurance. The bank was aware of these yet well ceo told this committee that fraudulent sales practices were limited to the Community Bank. This was not a casual response, it caught somebody off guard at a hearing, it was a written response undoubtedly approved by lawyers and others at the bank, may be venue among others who saw the response you for it was sent to congress. A week after the board of directors initiated its independent review. The report to the board whose members are paid 370,000 for a parttime job to prepare for and attend several meetings. Found that the fault lay elsewhere. Thats cold comfort to the thousands of employees who make perhaps one tenth of what these Board Members make were fired for failing to generate enough new accounts. The Board Limited the scope which is troubling. Should it wanted to know that additional problems existed in the other divisions. The changes they have made are not sufficient. The pad numbers and an effort to increase executive compensation. In light of the millions of americans defrauded by wells fargo, the recent at the fax breach that compromise 145 million americans personal Financial Information in the breach that led to insider trading, its no wonder the public doesnt trust our financial system. We need strong rules to guard against abuses and payday lending and credit reporting accuracy. Rather than working to rollback Consumer Protections that this committee wants to do we should be supporting the bureau, supporting other watchdogs that stand up for hardworking americans when Big Companies take advantage of them. Thank you. Thank you senator. We will proceed from testimony from mr. Sloan, the chief executive officer and president wells fargo. Your written statement will be made part of the record in its entirety. You may proceed with your oral remarks. Chairman, ranking member, by name is tim sloan and im the ceo of wells fargo. I think you for the invitation for this here on wells fargo, one year later. This is a year disappointment in transition. But my predecessor testified here lester we havent grappled with the damage, the sales practice scandal had done to our customers, our team members, and their trust in our bank. We recognize too late the scope and seriousness of the problems in our Community Bank. We did not come to congress with a good plan and we deserved your criticism. But, i heard you. I heard our customers and team members. I heard them loud and clear. You expect us to do better, and so do we. Let me be clear. I am deeply sorry for letting down our customers and team members. I apologize for the damage done for all the people who work in bank at this important american institution. When the challenges demanded Decisive Action we acted too slowly and too incrementally, that was unacceptable. I want to be clear, wells fargo is a better bank today than it was a year ago. And next year wells fargo will be a better bank than it is today. Thats because we spent the last year determined turned back the publics trust. Since i became ceo my team and i have big home focused on three tasks, first in response to the sales practice problems announced in 2006 we are transforming our Community Bank. We have a strong leader, oversight compliance and Human Resources are more effective and have far greater visibility and accountability across the company. We have revamped the incentives for team members by eliminating Product Sales goals. Today we reword teamwork and Customer Service, not just selling products. Our bank is a fundamentally Different Organization from the one that existed in 2016. We are reviewing our accountability through the entire company. Now when a concern emerges we identify it quickly, we escalated promptly, would disclose it appropriately away address it fully. We will demand individual executive accountability. We have clawed back 180 million in executive compensation and have fired senior retail, mortgage and Auto Executives for not performing to the standards or customers deserve. Third, for compensating every customer who is suffered because wells fargo made recent the stakes. Last year we looked at accounts that were opened. This year we went back and took a closer look at 165 million accounts open be tween 2009 and 2016. Just as expected we found more accounts that should not have been open. It was not new potential misconduct since last year, it all happen before 2017. But its a serious issue. We are committed to fixing it. Of the 3. 5 million potentially on authorized accounts, about 190,000 incurred 6 million in fees and charges. Wells fargo is refunding every nickel. Were repaying 142 million to compensate customers including for increased borrowing cost credit score impacts. Apart from these reimbursement mechanisms want to be clear that we are committed to addressing any concern that any of our customers may have about an unwanted product or service, no matter where when it may have occurred. If theres a problem we want to hear about it. This past year has been humbling and challenging. My number one job is to make sure nothing like this happens again at wells fargo. Fortunately joining me are 270,000 Outstanding Team members. Im part of their work and want to thank them for their commitment to making things right. I see improvement every day and said or team members. Our customers have noticed the provement too. We will not stop until we restore trust and make wells fargo the finest and most Ethical Company can be. Thank you for the opportunity to address the committee. I look forward to your questions. And are hearing members ask questions about how customers and consumers whose Credit Scores were impacted would be made whole. Cases where the Credit Scores were negatively affected how is wells fargo working to reimburse those costs . For doing that in a few ways, we went to the Credit Bureaus and provided the names of our customers whose accounts could have been inappropriately open. Because of regulation the Credit Bureaus couldnt provide us with the detail of those back to us. But we saw was about 40 of the customers had no use of the trade lines within one year. Their credit was not impacted. Of the remaining 60 about 25 had no impact on their Credit Scores. The main impact was about four points. Numbers are just numbers. Certainly more customers were impacted and some couldve been impacted by more than four points. We reached out to 43 and half million Small Business and consumers and said, if you have an issue come in and see us and we will make it right. Approximately 41000 customers have come in. About half had credit related issues. We have made it right for those customers. In addition as part of the settlement that i mentioned, the lion share of those funds will go to customers whose credit score have been impacted. Will be working with the experts and attorneys for the class provided. Will provide them with whatever information they want. Were reaching out to 43 million customers again, as well as tens of millions of customers to make sure they know about the Class Action Settlement so they can be made whole for any credit impact. Some of those actions required include the establishment of a compliance committee, carrying out a risk review sales practice risk and maintaining enterprise ride Risk Management and oversight. What is the involvement of regulators since the initial incident including in response to unauthorized accounts and the cpi issues . We have an active dialogue with the regulators, the Federal Reserve, the occ were talking about bank related issues. For example, as it relates to collateral protection or cpi issue, when that escalated in the Third Quarter we reported it to her regulators on a realtime basis. We been working to keep them apprised of the issues and working with the occ to make sure the remediation plan for any customer impacted by cpi is acceptable. As it relates to the fundamental changes ive made since i became ceo, the compliance we have done the following. Weve centralize all of our enterprise risk and control, that was one of the failings that was found and we agree. Those have been centralized. Were hiring a new compliance officer. We devised a new compliance plan. Weve created a conduct office the centralize risk group that independently brings up complaints, epic line issues, and the team member turnover so we can connect the dots better than we did a year ago. I dont think we have a good answer yet as to how and why this activity went on for so long in your bank. The Company First blame to rogue employees, trying to meet unrealistic sales goal then blamed the executive who earned 9 million and finally john stumpf who earn 19 million that year. You been at wells fargo for a long time. Youve been head of the wholesale bank which includes overseeing insurance. Was there no point prior to 2015 with the lawsuits, termination and whistleblowers, was there no point that you saw problem that required action . Thats incorrect. Ive been public and made the statement on a number of occasions and in finding the board report that in 2013 when sales practice issues were elevated to the operating committee i set on that committee. It was elevated to that group, we took action, but in hindsight we took action that was insufficient as i said in my Opening Statement. Im angry about how we handle the problems historically. Im disappointed in how we handle those. But the fundamental change i made since ceo is addressing the failings without the board pointed out our regulators pointed out in the mistakes i saw my prior roles. Thats an answer, but as a cfo and having a strong close relationship it still perplexes me why you are a good now for speaking out about it for years ago could have more impact. You test about how it has changed, but i think actions speak louder than words. Use forced arbitration were Bank Accounts have been opened in their names. I mentioned a 2015 lawsuit that they were able to squelch because of this clause, not only did you use forced arbitration, but the bank took the position that the fine print on a real account should apply for one. So you settle with some customers on that issue. You are making that argument last month about customers in utah. Then you ask a court to toss out a class action on a different scandal. Again, based on forced arbitration clause you force your customers to sign. Many competitors are eliminating the practice of forced arbitration, with would you commit to the committee today that you will quit using forced arbitration . No, i wont. When i hear the word arbitration what i hear sword feeling. When we have to rezone and have to have a conversation with our customers about arbitration, it means we dont have the right product, havent provided it in the right way or responded to their complaint so let me describe what we have done to change. We are doing a thorough review of our services to make sure theyre right for customers. In some situations we stop providing certain products because we couldnt provide them in the appropriate way. Improving how to train our people and team members to seller products and provide the right advice and service. When a customer comes in were trying to resolve the complaint completely. One change weve made is making fundamental changes at the Community Bank. When you commit our branches one of our bankers are tellers doesnt say can handle your problem, we settle it there a trend that in there. As part of resolving the sales practice issues weve expanded to a nationwide mediation. We pay for a mediator to work on behalf of our customers is an independent mediator to resolve complaints. Im happy to say that of the 43 million and a half customers we reached out to. I need to cut you off. I wanna follow up. I appreciate the answer, but i think forced arbitration clause always give the advantage to the bank as we know, youre still going to use those forced arbitration clauses to take advantage of your customers the way you did in suits 13 and 15 in the case against the customers in utah. Why should we believe youre committed to changing practices when you continue to use that behind closed doors arbitration system that clearly doesnt allow customers their day in court . Because we have made fundamental changes to the way that we do business. It will limit. Limit the number times is good, but give them their day in court. Those that you are not able to help. Or satisfy. I look at the study and is said that arbitration is fast and efficient for consumers. The study said that consumers have better returns, higher resolutions with institutions. That selective reading. Keep in mind where they only came out on that question. Senator kennedy. A morning. Like you, i believe in the First Responders<\/a> who put their lives on the line to save others. Both centers of nevada arse absent today because theyre in nevada. I know that senator heller and cortez are doing all they can there we will be reunited in prayer and support with them during this difficult time. Today will hear testimony from wells fargo chief executive officer. Over a year ago john testified in front of this committee on the bank bank account scandal and his handling of the fallout. Of the many issues emphasized during the Committee Members<\/a> one was the need to hold executives accountable and to ensure customers impacted will be made whole. He committed the bank would take necessary actions to make it right and restore the public and Investors Trust<\/a> in the company. Incidents like these remind us how important it is to Institute Policies<\/a> and procedures that foster customer protection, identify problems and treat customers fairly. Since that hearing they have made changes to the Corporate Structure<\/a> in an effort to address these concerns. Developments and disclosures at the bank in the last year merit new scrutiny. In august 31 they announced the results of an expanded review of Retail Banking<\/a> accounts which included those opening january 2009 and september 2016. The phone potentially unauthorized accounts was three and half million instead of 2. 1 million. They discovered problems with its Auto Insurance<\/a>, or cpi program in selfreported these issues to regulators. In response to complaints received policies purchased on behalf of customers purchased in 2012 or eight and found they be 800,000 customers may have been harmed by the practices. Customers were charged for Car Insurance<\/a> they did not need. Some had their vehicles wrongly repossessed. For families, having your car repossessed her credit compromised is devastating. These new developments raise questions that must be answered. Including what have they done to ensure customers affected by these issues are or will be made whole . More complex question cases, how is wells fargo working with the other parties to restore Credit Scores<\/a> and return amounts were customers experience higher borrowing costs . What changes have they made in the last year to address post past issues and new revelations . I what new evidence is there . And as members as last year, what has been the involvement of regulators since the initial incident and in response to the new disclosures . We welcome comments on these matters. Before we get to the testimony, senator brown. I act your comments about the citizens of las vegas and those visitors that lost their lives and were injured in that shooting. Our hearts go out to them and their families, special concern to senators heller, i hope that after every charge at a we say hearts and minds go out to those victims. I hope the senate will actually do something about this for a change. A year ago john stumpf sat in the searing attempting to explain the inexplicable. The banks punitive sales goal have pressured its employees to open over 2 million fraudulent accounts. In written questions they asked mr. Stump if he was confident that this type of fraudulent activity existed and no other part of wells fargo. We asked about products including insurance. On november 15 they responded they believe the activity was issued to certain members within the Community Bank<\/a> division. Weve learned that the problems are larger and most systemic than originally disclosed, before being forced to come clean wells fargo went to Great Lengths<\/a> to bury the scandal. Subjected customers to forced arbitration preventing them from their day in court and further concealing the fraud. Employees who try to alert Senior Management<\/a> there were silenced or fired. In 2013 a california customer sued claiming they had open several on authorized accounts in his name. Wells fargos forced the case out of the courts and into nonpublic arbitration claiming the terms of a real account should govern the fake ones. They forced that out of the claiming the terms that a real account should govern the fake ones. The bank again used its fine print legalese to fight to keep the case under seal, using forced arbitration. Has it changed . Just two months ago they used forced arbitration clause in august of this year they finally disclosed a number of fraudulent accounts 70 higher than originally reported. They revealed and stuck 800,000 customers without insurance policies without telling them or checking to see if they had insurance. The bank was aware of these yet well ceo told this committee that fraudulent sales practices were limited to the Community Bank<\/a>. This was not a casual response, it caught somebody off guard at a hearing, it was a written response undoubtedly approved by lawyers and others at the bank, may be venue among others who saw the response you for it was sent to congress. A week after the board of directors initiated its independent review. The report to the board whose members are paid 370,000 for a parttime job to prepare for and attend several meetings. Found that the fault lay elsewhere. Thats cold comfort to the thousands of employees who make perhaps one tenth of what these Board Members<\/a> make were fired for failing to generate enough new accounts. The Board Limited<\/a> the scope which is troubling. Should it wanted to know that additional problems existed in the other divisions. The changes they have made are not sufficient. The pad numbers and an effort to increase executive compensation. In light of the millions of americans defrauded by wells fargo, the recent at the fax breach that compromise 145 million americans personal Financial Information<\/a> in the breach that led to insider trading, its no wonder the public doesnt trust our financial system. We need strong rules to guard against abuses and payday lending and credit reporting accuracy. Rather than working to rollback Consumer Protections<\/a> that this committee wants to do we should be supporting the bureau, supporting other watchdogs that stand up for hardworking americans when Big Companies<\/a> take advantage of them. Thank you. Thank you senator. We will proceed from testimony from mr. Sloan, the chief executive officer and president wells fargo. Your written statement will be made part of the record in its entirety. You may proceed with your oral remarks. Chairman, ranking member, by name is tim sloan and im the ceo of wells fargo. I think you for the invitation for this here on wells fargo, one year later. This is a year disappointment in transition. But my predecessor testified here lester we havent grappled with the damage, the sales practice scandal had done to our customers, our team members, and their trust in our bank. We recognize too late the scope and seriousness of the problems in our Community Bank<\/a>. We did not come to congress with a good plan and we deserved your criticism. But, i heard you. I heard our customers and team members. I heard them loud and clear. You expect us to do better, and so do we. Let me be clear. I am deeply sorry for letting down our customers and team members. I apologize for the damage done for all the people who work in bank at this important american institution. When the challenges demanded Decisive Action<\/a> we acted too slowly and too incrementally, that was unacceptable. I want to be clear, wells fargo is a better bank today than it was a year ago. And next year wells fargo will be a better bank than it is today. Thats because we spent the last year determined turned back the publics trust. Since i became ceo my team and i have big home focused on three tasks, first in response to the sales practice problems announced in 2006 we are transforming our Community Bank<\/a>. We have a strong leader, oversight compliance and Human Resources<\/a> are more effective and have far greater visibility and accountability across the company. We have revamped the incentives for team members by eliminating Product Sales<\/a> goals. Today we reword teamwork and Customer Service<\/a>, not just selling products. Our bank is a fundamentally Different Organization<\/a> from the one that existed in 2016. We are reviewing our accountability through the entire company. Now when a concern emerges we identify it quickly, we escalated promptly, would disclose it appropriately away address it fully. We will demand individual executive accountability. We have clawed back 180 million in executive compensation and have fired senior retail, mortgage and Auto Executives<\/a> for not performing to the standards or customers deserve. Third, for compensating every customer who is suffered because wells fargo made recent the stakes. Last year we looked at accounts that were opened. This year we went back and took a closer look at 165 million accounts open be tween 2009 and 2016. Just as expected we found more accounts that should not have been open. It was not new potential misconduct since last year, it all happen before 2017. But its a serious issue. We are committed to fixing it. Of the 3. 5 million potentially on authorized accounts, about 190,000 incurred 6 million in fees and charges. Wells fargo is refunding every nickel. Were repaying 142 million to compensate customers including for increased borrowing cost credit score impacts. Apart from these reimbursement mechanisms want to be clear that we are committed to addressing any concern that any of our customers may have about an unwanted product or service, no matter where when it may have occurred. If theres a problem we want to hear about it. This past year has been humbling and challenging. My number one job is to make sure nothing like this happens again at wells fargo. Fortunately joining me are 270,000 Outstanding Team<\/a> members. Im part of their work and want to thank them for their commitment to making things right. I see improvement every day and said or team members. Our customers have noticed the provement too. We will not stop until we restore trust and make wells fargo the finest and most Ethical Company<\/a> can be. Thank you for the opportunity to address the committee. I look forward to your questions. And are hearing members ask questions about how customers and consumers whose Credit Scores<\/a> were impacted would be made whole. Cases where the Credit Scores<\/a> were negatively affected how is wells fargo working to reimburse those costs . For doing that in a few ways, we went to the Credit Bureaus<\/a> and provided the names of our customers whose accounts could have been inappropriately open. Because of regulation the Credit Bureaus<\/a> couldnt provide us with the detail of those back to us. But we saw was about 40 of the customers had no use of the trade lines within one year. Their credit was not impacted. Of the remaining 60 about 25 had no impact on their Credit Scores<\/a>. The main impact was about four points. Numbers are just numbers. Certainly more customers were impacted and some couldve been impacted by more than four points. We reached out to 43 and half million Small Business<\/a> and consumers and said, if you have an issue come in and see us and we will make it right. Approximately 41000 customers have come in. About half had credit related issues. We have made it right for those customers. In addition as part of the settlement that i mentioned, the lion share of those funds will go to customers whose credit score have been impacted. Will be working with the experts and attorneys for the class provided. Will provide them with whatever information they want. Were reaching out to 43 million customers again, as well as tens of millions of customers to make sure they know about the Class Action Settlement<\/a> so they can be made whole for any credit impact. Some of those actions required include the establishment of a compliance committee, carrying out a risk review sales practice risk and maintaining enterprise ride Risk Management<\/a> and oversight. What is the involvement of regulators since the initial incident including in response to unauthorized accounts and the cpi issues . We have an active dialogue with the regulators, the Federal Reserve<\/a>, the occ were talking about bank related issues. For example, as it relates to collateral protection or cpi issue, when that escalated in the Third Quarter<\/a> we reported it to her regulators on a realtime basis. We been working to keep them apprised of the issues and working with the occ to make sure the remediation plan for any customer impacted by cpi is acceptable. As it relates to the fundamental changes ive made since i became ceo, the compliance we have done the following. Weve centralize all of our enterprise risk and control, that was one of the failings that was found and we agree. Those have been centralized. Were hiring a new compliance officer. We devised a new compliance plan. Weve created a conduct office the centralize risk group that independently brings up complaints, epic line issues, and the team member turnover so we can connect the dots better than we did a year ago. I dont think we have a good answer yet as to how and why this activity went on for so long in your bank. The Company First<\/a> blame to rogue employees, trying to meet unrealistic sales goal then blamed the executive who earned 9 million and finally john stumpf who earn 19 million that year. You been at wells fargo for a long time. Youve been head of the wholesale bank which includes overseeing insurance. Was there no point prior to 2015 with the lawsuits, termination and whistleblowers, was there no point that you saw problem that required action . Thats incorrect. Ive been public and made the statement on a number of occasions and in finding the board report that in 2013 when sales practice issues were elevated to the operating committee i set on that committee. It was elevated to that group, we took action, but in hindsight we took action that was insufficient as i said in my Opening Statement<\/a>. Im angry about how we handle the problems historically. Im disappointed in how we handle those. But the fundamental change i made since ceo is addressing the failings without the board pointed out our regulators pointed out in the mistakes i saw my prior roles. Thats an answer, but as a cfo and having a strong close relationship it still perplexes me why you are a good now for speaking out about it for years ago could have more impact. You test about how it has changed, but i think actions speak louder than words. Use forced arbitration were Bank Accounts<\/a> have been opened in their names. I mentioned a 2015 lawsuit that they were able to squelch because of this clause, not only did you use forced arbitration, but the bank took the position that the fine print on a real account should apply for one. So you settle with some customers on that issue. You are making that argument last month about customers in utah. Then you ask a court to toss out a class action on a different scandal. Again, based on forced arbitration clause you force your customers to sign. Many competitors are eliminating the practice of forced arbitration, with would you commit to the committee today that you will quit using forced arbitration . No, i wont. When i hear the word arbitration what i hear sword feeling. When we have to rezone and have to have a conversation with our customers about arbitration, it means we dont have the right product, havent provided it in the right way or responded to their complaint so let me describe what we have done to change. We are doing a thorough review of our services to make sure theyre right for customers. In some situations we stop providing certain products because we couldnt provide them in the appropriate way. Improving how to train our people and team members to seller products and provide the right advice and service. When a customer comes in were trying to resolve the complaint completely. One change weve made is making fundamental changes at the Community Bank<\/a>. When you commit our branches one of our bankers are tellers doesnt say can handle your problem, we settle it there a trend that in there. As part of resolving the sales practice issues weve expanded to a nationwide mediation. We pay for a mediator to work on behalf of our customers is an independent mediator to resolve complaints. Im happy to say that of the 43 million and a half customers we reached out to. I need to cut you off. I wanna follow up. I appreciate the answer, but i think forced arbitration clause always give the advantage to the bank as we know, youre still going to use those forced arbitration clauses to take advantage of your customers the way you did in suits 13 and 15 in the case against the customers in utah. Why should we believe youre committed to changing practices when you continue to use that behind closed doors arbitration system that clearly doesnt allow customers their day in court . Because we have made fundamental changes to the way that we do business. It will limit. Limit the number times is good, but give them their day in court. Those that you are not able to help. Or satisfy. I look at the study and is said that arbitration is fast and efficient for consumers. The study said that consumers have better returns, higher resolutions with institutions. That selective reading. Keep in mind where they only came out on that question. Senator kennedy. A morning. Like you, i believe in the Free Enterprise<\/a> system. I think it has lifted more people out of poverty that all of the social programs put together. I am certainly not antibusiness, quite the contrary. We all on this panel talk about the importance of jobs, i dont see how you can before jobs if youre against business but what im curious about is what in gods name were you thinking . Im not against im happy when businesses are successful. Im not against big. With all big due respect, im against don. Im against a business practice which has wells fargo first and customer second. I think it out of the customers are first and wells fargo second. I think its better for the customer and better for wells fargo. When did this start . Senator, i completely agree, wells fargo cannot be a successful american constitution or employ 270,000 of the best team members must we put our customers first. Theres no question are Community Bank<\/a> we had an Incentive Plan<\/a> that puts selling products first as opposed to customers first. Theres nothing wrong with that if its good for the customer. But when did it start . We investigated back to 2009. The board of directors, an independent board of directors look back as first 2002. Thats where they found that they saw instances of inappropriate Sales Activity<\/a> under that plan. We should a vendor that plan years ago. We made a mistake, we have ended that plan, rolled out a new Incentive Plan<\/a>. That plan rewards good Customer Service<\/a>. Every words providing products in the right risk. I appreciate that, and im really not trying to be rude, should we just have a five minute limit and our chairman enforces it strictly as he should, can you tell me, was the total number now of fake accounts you found . In our review going back to 2009 because we couldnt call in a 65 Million People<\/a> weve used a conservative set of data. And what did you come up with . There were up to potentially 3. 5 million unauthorized account. An expected 2009. To go back further than that . The reason we did 2009 is thats when wells fargo and waconia came together. Pgh so, money did you make off of those 3. 5 million fake accounts . They were potentially unauthorized. Lets assume they were all unappropriate, we found 190,000 accounts that we charge fees. Those approximately 6 million in total we have refunded that. Was anybodys credit impacted . Not for those deposit accounts but potentially for the unauthorized credit card accounts. Their credit could have been impacted, we are in the process of working to correct that. You said you talk to the Credit Bureaus<\/a>, are they being cooperative . Yes they are. Will we provide them information about customers they cannot provide us the detailed Credit History<\/a> without the customers approval. They gave out first data without the customer name. I thought you could buy it from them . We cannot buy it from them. Thats why its important part of the 442 million settlement and naturally the linchpin of that settlement is to make it right for the Credit History<\/a>. Thats how they get their Credit Histories<\/a> fix. In addition, if they come in to see us will do that. Thank you. Thank you for being here today. Let me go through what we have learned over the last year. September 2016 with her and 2. 1 million accounts have been fraudulently set up, credit checking, debit, july 7 of 2017 we learned that wells fargo set up a thousand Auto Insurance<\/a> policies who didnt want or need them. In august 2017 we learn to an additional 1. 8 million, over and above the twopoint 1. 4 million accounts were set up. If you have those up it brings the accounts to 4. 3 Million People<\/a> either fraudulent accounts or insurance companies. 4. 3 Million People<\/a> is over four times the state of montana. Its a goodsized chunk of folks. The chairman of this committee and the Opening Statement<\/a> basically asked you what have you done that has changed this culture . Its not one person or tellers on the ground, it has been a culture, so what can you tell me concisely the you have done. And ive talked about transforming your Community Bank<\/a>s. But as ceo or the board what have you done to ensure that we will be back here next week, month or year from the talking about something else. I cannot promise you perfection but we are working as hard as we can to get to near perfection. Reviewing processes and procedures. What we had to do and what you criticize us for last year and youre right is we needed an executive team to take full responsibility. We needed to reinforce that from our team. We talked and asked them what theyre concerned about. They were concerned about things like pay an escalation of issues. And things like executive accountability. Things like revamping our equity. We listen to our team. As we listen to our team that changes the culture. Our turnover is now down to the lowest level in four and a half years. Down to the lowest level in the Community Bank<\/a>s we had the biggest issues. I hope this works, i think its essential that it works. For doing this again six months from now, its not going to be good. You talked about things you have done improving training, resolving problems. He talk about nationwide mediator, who pays for that . We do. Who chooses them . The customer does. There the one who makes the call . We provide them with names they can decide who they want to use and will pay for it. Let me talk about what forced arbitration. Is it true youre using force arbitration when it is about a real account on a fake account . Weve dealt with this on the hundred 42 million settlement. We agreed to that settlement. We said, coming to see us, we will make it right by them. If youre not happy. The question is, were you using force arbitration from a real account and applying it to fake accounts set up on arthritis . There were instances historically. Were not doing that today. Will you commit to not use force arbitration and accounts that were set up without the authorization of the customer . If theres a situation. Yes or no woodwork. If we have set up an account that was inappropriately set up without the customer we will make a right by them. We will not. Theres not good to be reason to have a conversation. But let me point out, that was being used six months ago my staff whispered in my air that they were using arbitration on fake accounts that were set up on real accounts. I appreciate your question. Were not doing that. If we set up an account. The only time i get in fights with folks is when they dont give me a yes or no answer. The question is this. And you can answer in another way, but will you commit to not use force arbitration on accounts that were not authorized by the customer . The easy answer is yes. We have not done that. And you will not to that moving forward. Thank you very much. Thank you for being here. The entire Banking Committee<\/a> is at least irritated by what we have uncovered and part of it is if its from 2011 at 2015 your 2. 1 million fraudulent accounts. Them from 2,922,015 its a 70 increase. Were those new accounts were did you miss some between 2011 at 15 . The majority of the increase was in 2009 intemperate extending that to september 2016. Because we use a conservative view for the original timeframe of 2011 through 2015, we picked up a few additional. It was not within that time. Crack, 2009 and ten, and through 2016. So half a million customers were enrolled in bill pay without consent. They were charged without Auto Insurance<\/a> without their knowledge, how about homeowners, Flood Insurance<\/a> and property insurance . Having spent years in the Insurance Business<\/a> Auto Insurance<\/a> is the lower tier what banks engage in. Homeowners is significantly higher and they find themselves being charged by the bank temporarily. Flood insurance you see that happen oftentimes. Are the numbers and the homeowners just insignificant . Do you have a number . We havent found issues there. If you have to come back in six months which might be good for you to come back to have another opportunity for us to know what happened. My question is, if you havent found any instances of inconsistencies in other Insurance Related Services<\/a> that would be surprising having dealt with banks consistently for 20 years. How do we know, did you say you have 165 million customers . We looked at hundred 65 million accounts. We have over 70 million customers. We serve one out of three u. S. Households. So out of 70 million customers youre confident that 3. 5 million is the final number. Of potentially unauthorized accounts . Yes. Lets talk about the corrosive culture that doesnt start a local Retail Locations<\/a> or tellers, a corrosive culture starts at the top. And it germinates. And folks feed off of that. Have you change the corporate leadership in the Corporate Culture<\/a> that will find itself at Retail Locations<\/a> . First we looked at what caused the problems in a retail bank. First and foremost the issue was that we had an Incentive Plan<\/a> that drove an inappropriate sales culture. That ended and we have a new Incentive Plan<\/a>. The feedback we have gotten, will get the results of the Third Quarter<\/a> set theyre very pleased with the plan, as we survey them there telling us they like the new conditions at wells fargo. Weve actually hired back with hired 17000 new team members into a retail bank sets september. Of those, several were those who had worked in retail bank that left because of the old culture or dismissed because they didnt meet certain sales quotas. To me, those folks coming back reinforce the changes that were making is taking hold. My thought is that your sales culture isnt driven by the sales products. Ultimately its not the sales goals, not the product selection, as the people. Its the people in management positions who put more pressure for results than an average person can get. If you havent change the people is difficult to change the culture. I agree with you. Thats why named the new head of our Community Bank<\/a> group who i mentioned, mary mack is doing an excellent job. She has gone through each of the levels of management and have everyone reapply for their jobs. We reduce managers to change the span of control. We eliminated layer. But the issue is not just the Incentive Plan<\/a>, we created a culture managers settling how to manage because of that plan. Getting rid of the planet making sure we had the best managers. Now, where the process of retraining everyone, starting at the top before you get to the folks in our branches. Thank you. When you are named ceo after the of fake accounts scandal, you are asked why a career as a wells fargo insider like you, why that means you the right person to fix the problems at the bank and he said quote, because ive been making change for 29 plus years at wells fargo. I went to look at your time there. From 2011 2014, the height of when wells fargo was cheating customers by putting fake accounts, you served as the chief financial officer. As cfo you talk to potential investors a lot. On those calls you aggressively promoted wells fargos ability to open up new accounts, didnt you . No, i didnt. Know you didnt . Here are the transcripts from all the investor earning calls they participate in. From 2011 2014. Ive read through them. On these calls, no one, not even john stumpf who is the ceo at the time break more about wells fargos ability and commitment to open new accounts for existing customers. In april 2011 call, i think i mark that one, you said i cant wait to get a credit card and every one of our credit worthy customers wallet. Nothing about whether they wanted or needed a wells fargo credit card. All that matter was opening new accounts. Youre bringing to investors about opening new accounts, you also personally owned roughly 2 million shares of wells fargo stock. I dont require call how much stock i owned. Its public. It looks like you had a really good thing going, talk up wells fargos ability to open new accounts, get investors excited and if the stock goes up by dollar you make a cool 2 million bucks. Then in december 2013, was three years in tears time as ceo. An article is written about opening new accounts. Space on the review of internal wells fargos documents, and interviews with more than 30 current and former wells fargo employees. It specifically said that employees had open fake accounts in response to the pressure. You were interviewed for that piece and you said quote, i am not aware of any overbearing sales culture. That is interesting freezing. I am not aware of any problem. So when the l. A. Times came to you and showed you concrete evidence of a terrible problem with fake accounts at your bank, did you launch an investigation into the issue before brushing it off . As it relates to my comments in 2011, im proud of the credit card products. Im not asking that. Youre brushed it off and said im not aware problems. Did you open investigation when someone laid out evidence of fake accounts . In that interview, to the best my regulation they didnt provide me with information. It was soon after. I take that as a no. You did not open an inquiry into it. Again, the l. A. Times didnt provide me with documents. So you had no clue did you read the article . Yes. And then you opened an investigation. At the same time the articles come in a the Community Bank<\/a> elevated this issue, thus the time we began to take action. Thats talk about that, you didnt look into the fake account but you went back to pumping up the stock price by breaking about their Record Number<\/a> of new accounts on your very next investor call. Forward to 2016, two months before the fake accounts scandal became public. Your chea chief operating officn an interview asked if you that the bank pushed sales goal and crossselling too far on your answer was no. The fundamental strategy we have is not going to change. That is july 2016. In july 2016 he knew thousands of employees had been fired for putting fake accounts and other sales violations. You knew aggressive crossselling goals were to blame. Still, you publicly said the bank didnt have a problem. Thats incorrect. Could you read the entire quote and could we go through the presentation . When asked about pushing a place to fart your answer is no. The fundamental strategy we have is not going to change. I was referring to the vision of our company. Including the fake scandals are being asked about . Every time i give a speech i talk about her vision. Our job is to satisfy financial needs and help them succeed financially. Since i have become ceo ive made fundamental changes to address the issues that were talking about today. You are asked about pressure on employees that cause the fake accounts scandal. Problem would you are asked about it you live. About personal responsibility. Wells fargo she the millions of people, for years. The Federal Reserve<\/a> should remove the current Board Members<\/a> who served during that fake accounts scam. You think youve been making changes there for 30 years but you enabled the fake accounts scam and get rich off it and then he tried to cover it up. At best you are incompetent, at worst you are complicit and either way you should be fired. Wells fargo needs to start over and that wont happen until the bank rid itself of the people like you who let itself into that. Mr. Chairman, respond to that . I want an equal amount of time. Ill get your criticism of me in a moment. The lets talk about the bird. The board has taken very important steps in terms of a thorough, independent investigation that has been made public. Thats number one. Number two the board has taken strong action in terms of executive accountability that is unfortunately some of the highest incorporate american history. I dont believe your criticism of the border are accurate. As it relates to me, the reason im the right person to run this company today, notwithstanding your criticism, is because ive been making change at the company for the for 30 years. I have made mistakes but having knowledge of the company and ability to make the change, the actions that ive taken since i became ceo have made fundamental change of this company. Im not afraid to make her decisions when needed. And i have the support of 270,000 people. I just want to make a short. I know were over. Are you kidding . Look, youve been there for 30 years. Every one of my colleagues on both republican and democratic side of spoken who talked about a broken culture at wells fargo. Talked about the fact that the problems are with leadership. The people who were there and leading wells fargo during the time of a years long scam, and multiple scams as our chairman pointed out. Those people should not be left in charge of this business. When you promote what is wrong with this bank, you went to the stock market bragged about it. You made money personally off of it. When asked you didnt tell the truth and try to cover it up. Wells fargo is not going to change with you in charge. Send it around his next. Please Pay Attention<\/a> to the time limit. I know were not supposed to be in the middle of this. We normally get five minutes. Some ago back, i know you dont always get the opportunity to respond but i want to hear your full response. You said basically a senator warren has indicated that you wanted to see everyone with a credit card we are in the banking products and one of the products we provide is a credit card. Any one of our customers that comes in to see us that is interested in a credit card we would like to provide it. I am proud of the hard work and effort of all our team members the work on credit cards. We have seen growth in that group because customers like using the product. Im not embarrassed about that. Whatever adjective or adverbs are used to describe what i said or did are taken out of context is inconsistent with the fact her job is to satisfy our customers financial needs. If that financial need means they want a credit card and we have the right product i would love for them to have it. That is what we do. Would you agree there was a broken culture at wells fargo during this time . I would agree in our Community Bank<\/a> we had fundamental problems created serious cultural issues. In terms of the rest of the company there were regular issues but i would not say the rest of the company with a broken culture. Having said that, as ceo and acknowledging i have been there 30 years, some dont think i should be in this role. We heard that today. What do we do as relates to culture . We asked third parties to help us do new culture surveys to make sure we werent missing any. Even though i have been there 30 years and have done something is good and i have made mistakes, to be in a position where it is just what i we should be doing, i want to listen to outside experts, all of our stakeholders and team members so we are making fundamental changes in the company to address any sort of weaknesses we have. One area we have concern with in particular, wells fargo, i want to make sure members of the military have special protections under the servicemembers civil relief act such as the soldiers credit or property when serving on active duty and can you please discuss the specific ways wells fargo has tried to improve its compliance with servicemembers in light of the sales practice issues, can you go into this to give us assurance there have been changes made with regard to how servicemembers are treated with regard to their credit activities . We care about all of our customers but i dont think there is any one customer we care more about than our service men and women. We created what we call a center of excellence that looks across the entire company to manage scr a matters. That center of excellence is staffed with experts that only look at the ways we can provide the appropriate benefits to our service men and women, we work closely with the Defense Department<\/a> to make sure we get on a daily basis updates from the Defense Department<\/a> in terms of which service men and women, which of our customers are on active duty, putting them in a different category and we are proud of the fact we made significant improvements. We have had historical issues, no question about that, but we needed to make fundamental change to create a center of excellence, to staff it appropriately and make sure they are looking across some. In addition, i am proud of the fact we have 8500 team members who are veterans. I made a commitment as ceo we want to hire 20,000 by 2020. In addition we have provided Financial Education<\/a> services to hundreds of thousands of service men and women so they can manage their finances appropriately and we have donated 300 homes free of charge to wounded veterans so they can have a place to live. You use a thirdparty to do the analysis on the accounts to find accounts and identify problems. Will you continue to use a thirdparty to double check in terms of whether your proposals and intents are being followed through on . It relates to 155 million accounts going back eight years. We went back and double check the prior period we had disclosed and expanded that. We put in additional policies and procedures in place to address those issues and those are independent of the business line. Was an issue we had before. Are you going to continue to use a thirdparty to review Due Diligence<\/a> to make sure the changes being made are actually being implemented . We are bringing in third parties to look at various procedures across companies so the answer is yes. Senator schatz. Mister sloan, the occ has Statutory Authority<\/a> to revoke National Charter<\/a> if a bank is found to violate National Bank<\/a> act. Why shouldnt the occ consider revoking your charter . Because we provide products and services to one of 3 american households, we talked about many mistakes we have made that today more often times than not we do that appropriately. The company is growing, the Company Provides<\/a> jobs to 270,000 people. You are too big . We are not too big at all. We have 270,000 team members. Sound like what you said. The reason the charter shouldnt be considered for revocation is the first thing out of your mouth with your size. First thing out of my mouth with our customers, we serve one out of every three customers, we take that responsibility very seriously, when you look at that in totality today, and appreciate we are looking at wells fargo, the changes 5 minutes only. That sounds to me, we allow members of the panel and audience to make a judgment about whether to explain this to somebody back home. You made 21 billion in profits last year, you made a nice salary. I want to personalize this. Your board makes a nice amount of money. You were coo when a lot of this went down and now you are ceo. Explain why this is fair. I am not 100 sure. You get a promotion. You get lots and lots of money. Lots of consumers get harmed. Explain in plain english why this is prayer fair. Ive taken responsibility for the mistake that have been made, taken action in my role as ceo, to make wells fargo a better bank that was a year ago. A better bank in the future. We are providing, proud of the fact that our bank, largest Small Business<\/a> lender and homeland her. We make a difference to americans every day. It occurs to me only in financial services, only in this industry, people make such massive errors, there doesnt appear to be accountability and only because of your size do we not understand totally which statutory tools, regulatory tools, to find a remedy. At a briefing for the staff wells fargo representatives explain banks would make goodwill payments to customers who had their cars repossessed and credits tracked as a result of Auto Insurance<\/a>, as i understand it the bank will designate a thirdparty administrator and as customers how to send a form explaining how they were harmed and how much money they need to be made whole. Claims are basically going to be paid, no questions asked. My question is why not cut checks up to 2000 for all of those impacted. And for the goodwill money, many of them wont do it. To presumptively push the money rather than force people to figure out they have this right and likely to be approved up to tooth dollars but have to go through the paperwork. We are making the 500 goodwill payment to every one of those customers whether they were impacted or not and have my commitment and make sure it is right for those customers the extent they were impacted. Can you provide the committee a list of all legislation wells fargo has lobbied for or against . We will respond to whatever inquiry you would like us to respond to. If you could respond in writing. Senator tillis. Thank you for being here. I want to make sure i have the numbers right. The thirdparty said 90 out of 90, 3. 5 million accounts that were open, back to and a half, appear to be unauthorized, 865 million accounts open, and that was 31 2 million unauthorized. Potentially unauthorized. I want to talk about how you focus on the customer and make this easy to recover from. I serve on the Veterans Affairs<\/a> committee and collie veteran in north carolina, his wife was opening the mail, mentioned to her veteran husband i didnt know you were dead. Of the va sent a notice he got miscategorized and was deemed dead. He thought it was a simple problem, had his military id card, called the va, you have reams of paperwork and several phone calls you will need to make to get reinstated and get your veterans benefits. Tell me how in making this right, i am not getting on a phone, listening to elevator music, getting transferred to several different accounts, how are you maximizing, minimizing the customers time and getting this right and similarly, how are any affect on underlying credit reporting agencies being dealt with . Is it my problem to deal with clearing up those accounts to aqua fax or the credit agencies, tell me about that process. To answer your first question, in the Fourth Quarter<\/a> we reached out to 431 2 million customers via their statements and email and said if theres anything about your account you think is right come in and see us and we will make it right by you and 41,000 have come in to see us. Most of those situations have been resolved with the customer right there to the extent they are not pleased with what we offered, we offered free mediation services, we pay for them, independent mediator and address their issues. One of the fundamental changes we made since i became ceo is the Customer Service<\/a> element with our branches historically when a customer came in we havent delegated the ability for a banker in one of our branches where a teller or Service Manager<\/a> to deal with on the spot and say you got an issue, call our 800number and that wasnt a very good Customer Experience<\/a> to your point. Under the new leadership of the bank she delegated the authority down to the branches so that when a customer comes in we try to deal with as many of those as we can the customers come in via online and mobile. We are trying to do a good job. I introduced six goals for our team in march and the number one goal is to provide the best Customer Service<\/a> and advice in the industry. I would love to tell you we are number one right now but we are not. I want to make sure we have enough resources. We are trying to figure out that i used 93 million and the 2 million unauthorized, 31 2 potentially unauthorized and a fraction of those occurred fees or any charges, is that correct . Correct. As a selfgoverning matter i worked for the Banking Industry<\/a> before i went into politics, you dont like opening accounts that have no activity because there is an inherent cost of operations you are incurring. I tried to figure out where the Circuit Breaker<\/a> didnt click, whether or not all those Circuit Breaker<\/a>s in your opinion have been fired so that we are trying to get to the governance issue. I have confidence you would work on, wells fargo would work on but tell me about governance in my remaining 25 seconds. The board engaged in an independent investigation, the board mentioned changes in terms of executive accountability which totaled 180 million in compensation that was clawed back, not authorized, there is a new ceo, we have an operating committee of which 5 of 10 members, and the board as well as we did, we revamped the way we have done that, there have been a lot of governance changes in the company, taking the risk control functions, you name it, and the business lines and risk, creating conduct office and risk function to independently look at complaints, questions and all kinds of things that would indicate we have issues in the company. I get those reports and that wasnt happening year ago. Senator van hollen. I was listening to your response about forced arbitration. Who knows what is in customers interest, wells fargo or your customer . Frequently the customer, that is why it is important from my perspective to get it right so that we dont your customer knows best, why do you deny them the ability to go to court . Why do you require customers to go to mandatory arbitration . We dont do that for all product and services. If your customer knows best . Many a simple question. If your customer knows best why do you deny them the opportunity to go to court . What you require arbitration . Most independent studies including the one done by the cfpb two years ago indicate it is better for the customer if the customer makes a customer brings the case, right . So if a customer decides it is in his or her best interest, forget studies, we know what the Consumer Financial<\/a> Protection Bureau<\/a> recommended, that we get rid of forest arbitration. You said to senator tester you would not apply forced arbitration with respect to fake accounts. Yes. There is an article here monday, september 18, 2017, a short time ago, in a case in utah, wells fargo lawyers have taken the position that forced arbitration does apply. Are you aware of that . Im not familiar with case. Let me read to you a reuters excerpt that reported september 18, 2007, in a motion on monday where wells fargo said consumers signed agreements to arbitrate disputes when they open their account at the bank and those agreements cover other accounts allegedly opened without their consent. That directly contradicts your testimony, doesnt it . I will look. If it is true. I will look into that matter. If it is true it directly contradicts your testimony, doesnt it . I will look into that matter. Im not asking you to look into it. If that is true, doesnt that contradict your testimony . Im not familiar with the facts of the situation so i cant answer that but i would be happy to look into it and respond to you. If it is true, it violates, contradicts i dont know if youre sworn in today but it violates your earlier testimony. Let me ask about overdraft fees. When it comes to overdraft scandals you are exercising your right to deny customers the right to go to court. Im not familiar with the overdraft scandal your referring to. Overdraft fees where you were charging customers fees on overdraft of fake accounts . We charge customers fees when they overdraw their accounts but im not file with overdraft scandal. As it relates to any unauthorized accounts, potentially unauthorized account could have been part of that 3. 5 million to the extent there were any fees charged we already reimbursed those to the customers so they have been made whole. You are in a case in 11th Circuit Court<\/a> of appeals, we will follow up with you. How about the practice where you were selling Auto Insurance<\/a> to people who didnt ask for it or didnt want it . There was a situation, 500 marylanders were affected, 500 have their cars repossessed, the subject of an npr radio story. Did you have a chance to hear that . I listen to npr but i didnt hear that. I would encourage you to do that. One of my constituents came out to go to work one morning, his name was michael pfeiffer, he was heading to his job in maryland, he walked into a place where he parked his car, it wasnt there. He called the police, said he was livid, but someone stole his car. Turns out it wasnt a car thief, it was wells fargos repossessors. He was flabbergasted because his insurance was current. He went to wells fargo, the folks at the local branch said this is nuts, you are covered. It took them, the employees of wells fargo, 21 2 hours just to connect to folks in the other branch. Question is very simple. If it takes the employees of wells fargo 21 2 hours to get in touch with others, takes individuals having to fight the system by himself, dont you understand why it makes sense for people to be able to band together to file their claims against a big company like yours rather than having to fight you one by one . What i understand is if we make a mistake we need to make it right and improve our processes. To the extent Mister Pfeiffer<\/a> has been made whole by us i would like to speak with him personally to make sure we are handling the situation to his satisfaction if we made a mistake. I would point out you said yourself, to know about Class Action Settlement<\/a> so they can be made whole. That is the way lots of people can be made whole at once. Mister pfeiffer is one guy. I find it amazing that you would say your customers come first and you deny them the choice of how to seek their compensation, how they seek justice. Senator perdue. How many states does wells operate today . All of them. Are you regulated in all of them . Yes. How many regulators do you have today . Federal reserve, sec. In addition we have securities regulators. 20112016 were you supervised by the Federal Reserve<\/a> . Yes. In their oversight, they were quite involved, did they reveal any material issues . They have but that is confidential information but we have active dialogue. Relative. In terms of retail they did not. Were you supervised in this period . Yes. Did they reveal any material issues relating to the situation . Yes it did. The comptroller of the currency, mister curry testified to that. Did the cfpb come up with, any material issues in this time . Not to my knowledge. Dealing with regulators any outstanding issues today . Absolutely. I have a long to do list. How is the company reacting to that list . We are listening. Im sure you are implanting too. We are listening to their concerns and making fundamental changes not only because they make sense as ceo but regulators also believe there are other changes we need to make. We are being very responsive. If they were here they would say we are not moving as quickly as they would like which i appreciate that, but our commitment to fixing anything that is broken and making wells fargo the best bank in this country is sacrosanct from my perspective. There is no way to sugarcoat this is a serious issue and i appreciate your handling it the way you are, i want to get to the governance issue. You have internal audit capability, right . Correct. As cfo, you have a sizable organization, how many people across the country are involved in that internal audit . Let me correct something. A lot of the group, several organization. Audit the financial organization. The chief Auditor Report<\/a>s to me, a direct reporting line to the audit examination. Your board has an external auditor as well. Who did that Auditor Report<\/a> . Our shareholders, they also provide independent reports to the board on Financial Condition<\/a> and other matters. The indiscretions, the audit capability or external audit capability disclose any of these . Internal auditors did. That is another area they could have done a better job and the chief auditor made fundamental changes but when it was reported to Senior Leadership<\/a>, we should have taken more aggressive action. Any other breach of operation occurred that has not been made public . Minor breaches. That is one reason above and beyond materiality in the Second Quarter<\/a> to provide an update on things like cpi, gap insurance, and encouraged the team, transparent the stakeholders more than we have ever been. Has the scope of internal audit functions relative to this problem . The reorganization, i dont know answers to the number of folks from kpmg that cover us but more than there was a year ago or the year before. Thank you, mister chairman. Senator heitkamp. One of the most important things we can accomplish here is to figure out whether we actually see or have a sense there is a culture change at wells. I have been listening to the line of questioning and i think anyone with an open mind would question whether we are seeing a culture change. Let me run through this. Senator warren asked about the la times at the time the story broke and we can acknowledge the la times had a huge role in this. You said you didnt have evidence of that so you didnt respond to it. Once it became a bigger scandal we are going to fix it. And we find out when we talk about it what we are going to fix, we now realize this is a problem and there have been mistakes made and then we find out after we will fix it that there was knowledge of this problem years before the la times story, the upper management knew about this problem and how they managed it and fixed it. They didnt fix it. We fire employees who open fake accounts saying they are the problem. That is where the problem is. You fire those who refuse to play the game. And they participated in public discussion, how they whistleblower on this, they trust us and fixing it. They come before this before this body, this is all you need to know, we have turned the corner and it is okay, only then to have this insurance scandal, now we hear we are going to fix it. I am like that three times. I know a little about baseball, you see something you dont see. What i want to say to you what goes back to your response to senator warren about the la times. In the course of 15 minutes, you were told about the overdraft in the 11th circuit. With the discussion on overdraft, you said you were not familiar. That sounds familiar. The legal position taken in utah and arbitration in the media. I would know about that if i were not you. Coming before the body. A National News<\/a> story, wells fargo involved in wrongful repossession of a car, a news story that millions of people listen to and you are not familiar with it. This is problematic for us because we need to see there is a culture change, a reaction to these kinds of consumer failures and we dont hear it here. We hear a lot of dont know, look into it, we really care about the customer. I would assume where we are right now is a lot of soulsearching at the highest ranks of wells fargo. Correct me if i am wrong, when i heard you saying mistakes were made at the Community Bank<\/a> driven by wrongful incentives that were provided to the employees, right . I have not heard you say other than taking responsibility for the incentive, that mistakes were made at the highest level of wells fargo. We can say yes, we lost the ceo and there has been some punishment and we are moving over but bottom line, i do not hear a level of culture change that satisfies me today and i that is something very problematic for wells fargo going forward. I am not familiar is not an answer we should be getting here. It should be yes, we are aware of that, we are fixing it. When we only here i am not familiar, we wonder what else we are not familiar and i would caution you, when you say this is everything, that is what the last ceo told us and the insurance scandal. It is up to your board to figure out what they are going to do but i hope you take these comments as constructive because it is not helpful to say you are not familiar. I appreciate your comments. In my Opening Statement<\/a> i was very clear that we take responsibility for the mistakes that we made. When i say we i mean me. I am the ceo of the company. The buck stops with me every day. I apologize that im not familiar with every matter but to the extent that i am not, we are going to follow up on all of those. As it relates to senator warrens comments, she asked me not if about the la times, but talked specifically about information the la times provided and if i took any action. The la times in that interview didnt provide me with information so i cant take action if the la times didnt provided. Having said that, we took action when that information got to the Senior Leadership<\/a> team. I have taken responsibility for the fact that we didnt take aggressive enough action. We are making a fundamental change at wells fargo to make things right for our customers and team members and stakeholders. Having said that i completely appreciate your frustration. I am angry about what happened at this company and i pledge to you not only are we fixing it but we will fix it. You cannot segregate the top from the bottom. It seems to me when you say we, we didnt get any information from the la times. Shouldnt have had to have information from the la times, should have read the story, is this true, lets go find out. And we did. You knew it was true because you knew about this years beforehand. I didnt and the board conducted an independent investigation where they looked at millions of documents, interviewed hundreds of people and their conclusion was consistent with what i said publicly here and elsewhere in the last year. The issues within Community Bank<\/a> were elevated to the Leadership Team<\/a> including me in late 2013. We should have and could have taken more aggressive action. I apologize for that. We have taken that aggressive action to fix the things that are broken. 2013. We have a document going back to 2008 but i will have to hunt it up. I dont have it in front of me. Senator cotton. Welcome to the committee, thank you for your appearance here today. I appreciate our visit in my office last week when you talked about the challenges wells fargo faced because of mistakes it made last year. For the customers, tens of thousands of men and women who work in your branches around the country to include arkansas who are worried about the future of the company and what it means for their ability to put food on their table and roof over their heads, one of the quickest ways businesses can see any impact when they make a mistake like this will display poor judgment is competition, customers can go elsewhere and go to another bank. One thing jamie diamond spoke about is the regulatory vote around big businesses. As it comes harder for smaller businesses to deal with regulations washington has imposed upon them, gives big business to be responsive. One good example is Certain Airlines<\/a> that mistreated their customers on occasion yet there are few choices you can go to if you want to buy from one city to the next. What Market Reaction<\/a> has wells fargo seen in terms of losing customers or going elsewhere or pressure from big competitors . The banking business in the us, involved for 30 years is very competitive, big banks, mediumsized banks, nonbanks provide customers with lots of opportunities for good product and services, no question after the Retail Banking<\/a> sales issues were announced there was an impact on our business but since then because of fundamental changes we have made in the company we are continuing to grow. We are not growing as fast as we were prior to last september but we are on a good trajectory and that is because we have taken responsibility, taken executive counselors responsibility, made changes in product and services and processes and customers are seeing that and reacting positively. We are not where we need to be but we are making progress. One of the things that seems peculiar to me about the controversy over fake account is how few have produced revenue. Not just that they were fake but wells fargo sales incentives rewarding employees for accounts that didnt produce revenue and the client didnt know about. Misaligned incentives, not even effective at the cheating system. It was stupid. What are the incentives . Why were they created . Retail banking business was focused on growing the number of accounts, too focused on growing the number of accounts, people just doing that as opposed to good product and services growing relationships in the right way. It was just stupid. You have been on board for a good bit of time to clean up everything. What is the risk of other misalignments in the organization of which you are not yet aware . Relatively low. Cant promise perfection but i told the team we need to get to it when we can so what we have done, part of our agreements with regulators, they said part of these consent orders, we need to look at incentive compensation structures across a number of products. As ceo i said no, we will go beyond that and look at incentive compensation system throughout the entire company, not just do it ourselves but bring in third parties to do it independently and get reports not only for Senior Management<\/a> but to our regulators and boards so we are very transparent about it. Im pleased they havent found anything as serious but we cant rest, we can never let something happen like this again. I would agree with that. We heard about force of arbitration this morning in this conversation in reference to Consumer Finance<\/a> Protection Bureau<\/a>s new arbitration rule. I would say if we allow that will to go into effect, we may not have forced arbitration but lawsuits because arbitration as an option in the arbitration system will cease to exist and forcing consumers to find the lawsuits of classaction lawyers. Mister sloan, you mentioned the buck stops with you, you will make it right for american customers and employees. Im concerned by outsourcing of Call Center Jobs<\/a> and wells fargo has eliminated several hundred jobs recently, more in recent years. At the same time you are letting these people go, you were adding positions in the philippines. How is that making it right by your people who work for wells fargo . We employ 70,000 team members, 90 in the us. The reason, in the us, 95 of revenue customers are here. We hire between 40 to 50,000 people in the us, currently we have 50,000 jobs open in the us, in the Retail Banking<\/a> business since september of last year, we hire 17,000 people, all in the us. Let me ask you this, did you let people go that were working in the call center areas, in the philippines at the same position . We want to provide products and services. That is an easy one. We did, our track record, we rehire somewhere between 70 to 80 of each of those folks into another job in wells fargo, they generally get a preferential treatment and review because we always have 15,000 jobs. What happened to the other 20 . I dont know. Would you make a commitment to figure out how to get them back on the team . I will make a commitment we want to hire as many qualified team members as we can because we have 15,000 jobs. Im asking for those 20 you talked about that may have been let go but not rehired, if it is not for various other reasons, if they were doing their job right would you commit to rehiring them . If we have jobs that are open they are qualified for of course i will commit to that. Why would you in the first place send these jobs to the philippines if they were being done here . Because frequently when we look at how to best serve our customers it makes sense to have folks around the world so we can continue to be working through a 24 hour day and not run a night shift somewhere. Our people are capable of working a night shift . I can show you a bunch of folks in my state who work night shifts. I dont mean to be critical of anybody who works the night shift at all. Just saying in terms of how to efficiently and effectively run our business we want to make sure our people are in the right place. We have over 250,000 in the us. We love doing business in this country. The buck stops with you. I may be patriotic, may be a flag waver, i stand guilty of both of those but i would put up your folks who work in those jobs against anybody anywhere else in the world. I want to ask about something else. In 2013, you said you sat on the operating committee and saw problems and you were concerned. It was around 2015 mister sutton came to my office extolling the culture of the company. I dont want to hold it to an exact date, 201516. If you were concerned in 2013, why didnt you stop it . We did take efforts to address the issues, but in hindsight i did not not in 2013. We should have and could have taken more aggressive action. For example in hindsight what we should have done is not end the incentive Compensation Plan<\/a> in our retail bank in the Third Quarter<\/a> of last year. We should have ended it years earlier. We dealt with the issue incrementally, didnt deal with the issue comprehensively and for that we take responsibility. When you saw that in 2013 and you said we have problems here, this isnt working, can you mention it to the board . Did you tell them we have problems eq things are not, the things you see are not the way they really are . My recollection which is consistent with the independent investigation the board did was those were escalated to the board in 201415. That is another area the management should have escalated. Did you escalate that to the board saying this is out of control . It was escalated by senior leaders. The board chose not to take action . The board was overseen, the actions we were taking, we represented, we thought they would address the issues. In hindsight we were wrong and it lessened the issues so the number of accounts and a number of team members impacted was declining. That is not how we should have dealt with the issue. The way we should have dealt with the issue was end permanently and we didnt deal with that in our Community Bank<\/a> until we ended the Incentive Plan<\/a> and changed the management last year. That was a mistake on our part and wont happen again. Thank you, mister chairman. Two senators asked for a second rounds. We have a few minutes left. Senator brown and senator warren asked for a second rounds, i may choose to do one myself. In my opening i talked about mister sloans testimony last year, the company lied to this committee and lied to the public. The Company Recently<\/a> disclosed it new in july 2016 customers had Auto Insurance<\/a> policies added to their auto loans without their consent, 800,000 customers, roughly the size of the state senator rounds represents. Every day since you have become a head of wells fargo for the last 11 months every day, you made a decision to not disclose this information to the public, the company knew about the Auto Insurance<\/a> policy when former ceo mister stumpf testified, when did you become aware of the first place Auto Insurance<\/a> policy . Why did you think it was okay to continue covering it up . I dont it was okay to cover it up, senator brown. When the issue was escalated to me in 2016 in late august or early september, i talked to our team about it and we decided at that time to end or quit providing insurance to our customers and that was effective at the end of september. We created an internal group made up of business line experts, legal experts, our auditing function, to look at the matter we brought in an independent law firm and independent Consulting Firm<\/a> to help us do a comprehensive thirdparty review of the remediation. We got the results of the report in the First Quarter<\/a> of last year. We began to put together the remediation plan and we disclosed that remediation plan in august and highlighted that, disclosed the issue in august, we described what our remediation plan is as relates to those 570,000 customers. Those checks have begun to go out and we reported that in the Second Quarter<\/a> 10q. We didnt we disclosed that to our regulators in the Third Quarter<\/a> of last year also. It took you, the company, you personally eight months, you the company 13 month to disclose such a violation of public trust, makes me incredulous. Let me move to something else. You said arbitration is better for consumers. How have consumers ferritin arbitration with wells on average . I dont have the answer. I do and im surprised you dont. On average, see mpd found consumers paid 7700 in arbitration overall, arbitration cases. Other data says wells customers paid 11,000 on average. The budget arbitration where you brought arbitration on the average consumers dont do very well on arbitration suggesting there is something wrong and also suggesting arbitration seems to work out well for wells fargo and not so well for your customers. It is troubling you continue to dig in and say arbitration is better for customers. Can i give you an example how we are changing the opening . 20 seconds because i want to respond. One of the issues we disclosed in the 10q was rate lock extension fees for our customers. We are not waiting for our customers to want to arbitrate. I want to make this very clear because it will come out in the next couple days because i might as well mention it for you. We are going to our customers and saying if you have a complaint about a rate lock extension fee you paid at wells fargo we will remediate it. 108,000 customers and we will say the following. Not saying you are not but i am saying on fundamental issues, senator cotton talked about whatever, he said optional, forced arbitration, not optional arbitration. The last point right before the scandal broke ceo compensation increased from 19 to 21 million. You will be increasing the minimum pay for tellers from 12 to 13. 50 an hour. To 17. 10 depending where they are located, 12 increase, 80 above the federal minimum wage. Federal minimum wage is poverty wages. The ceo overseeing mass rod get the compensation increased from 19 to 21 million a year and tell us get a raise making those tellers still eligible for taxpayer subsidies, to subsidize your employees, subsidies medicaid and food stamps and section 8 housing. You fight classaction from employees that didnt pay overtime, strikes me as a political to be boasting about a minor increase. It matters to them. It does matter to them. You defend wage theft in court by fighting these overtime claims by your employees. I am very proud of the fact that we raised base pay for our lowest paid team members, that is one of the reasons our attrition has gone down. They are saying we are paying fairly. In addition we provide benefits package to those team members that average 6 to 8000, we provide other benefits to them. We are seeing a team member base including lower levels, very happy to work at wells fargo and you have my commitment to make sure those team members are paid in an appropriate way. Senator warren. Mister sloan, since becoming ceo you set your priorities rebuilding trust. Of the company wide meeting, wells fargos mission has never been just about improving the bottom line and went on to assure them wells fargos employees were the most important and valuable resource. Is that right . I say that often. Two month after making those comments you held an investor day. You rolled out a new Financial Plan<\/a> and i would like to submit a copy of that plan for the record. I am sure you are familiar with this presentation. I have given you a copy of it too. On pages 26, and 27 you say wells fargo will cut 14 billion in expenses by the end of 2018. That is a huge cut in noninterest expenses. Here are the ways you will achieve those cuts. Can i correct what you said . It is not over a two your period, it is a four your period. Number 2, we said the first 2 billion we will be reducing we will be investing back into the business. It is not going to the bottom for our shareholders. Let me quote what you said to the investor. You were going to consolidate similar operations to provide better economies. Improving processes including Digital Technology<\/a> to manual processes and outsourcing certain nondifferentiated capabilities. That is a lot of corporate buzzwords but automating and outsourcing sounds a lot like firing people. Given statement about how much you value your employees can you tell us today you will not be firing any employees as part of this for billiondollar cut . I cannot. We have an obligation that is all i need to know. When i look at the numbers it looks like you will end up firing tens of thousands to make these numbers. Compensation and benefits for wells fargos biggest expense we are proud of that. We assume and 8 cut in those expenses, you would fire more than 20,000 employees in the next few years and here is the kicker, after telling your employees in march they were your most valuable resource and wells fargo has, quote, never been just about improving our bottom line, i want to repeat what wells fargo told investors two month later. We expect to billion dollars in annual expense reductions in 2019, going to the bottom line. You are literally telling wall street you are going to fire thousands of employees. Using math in inappropriately. Are you apply it to people. You apply it to people. You say you wont make these cuts by firing people, you cant make that promise. I have a responsibility to the 270,000 team members to make sure the companies in existence. One more thing i would like to read, if clear you will knock out a lot of employees here, it gets worse. At the same time you plan to fire employees, promising to spend 11. 5 billion in the next year buying back wells fargo stock, you have that much extra money. If you stick to your current plan it is clear wells fargo next 30 or 40,000 a year, just like they got screwed in a fake account scandal, executive demanded new accounts be produced at all costs, 5300 frontline employees paid for that with their jobs and now the fake account scandal has tanked wells fargos reputation, your way of pumping up the bottom line and keeping wall Street Investors<\/a> happy is to cut costs by firing low level employees. What happens in these cases, corporate scandals almost always the frontline workers who pay the price, not the executives. The only way we can stop these scandals is to hold executives personally accountable, fire the people who are responsible and when they break the law march some of them out in handcuffs and until we do that, these scandals will continue and working people will continue to take the brunt of it. Thank you, mister chairman. Could i respond . I am going to take my last word, im interested in what your answer would be to senator warren avenue statements and the assertions she makes. I couldnt disagree more with almost everything senator warren said. It is inappropriate to take various statements out of context and multiply numbers and apply them to people because what you are saying, youre scaring people and that is inappropriate. When you look at wells fargo, first and foremost my commitment is to our 270,000 team members to make sure they have a safe place to do business and serve their customers, they are paid fairly and what those team members are saying even in the midst of the fact that we need to become a more Efficient Organization<\/a> is they like working at the company because our attrition is down. Because our attrition is down to the lowest levels in years because they appreciate the fundamental changes so they are talking to them and understanding how they are feeling and we are making changes based upon what they tell us every other month 12, 3,000 team members unscripted to give suggestions but i have an obligation to make sure that we keep other stakeholders happy and that includes our shareholders who are not just wall Street Investors<\/a> that supports many retirees across the company. Weve got an obligation to them so my job as the ceo is to balance appropriately and im working as hard as i can to accomplish that. We would ask the witnesses respond to the questions as quickly as they can not knowing how extensive they will be and we cant give a specific timeline. We generally ask them, the questions be responded to in one week from when they are received. We will respond within one week. Cultlike. Without anything further than this hearing is adjourned. Thank you. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] today the senate Banking Committee<\/a> look at equifax Security Breach<\/a> and affected some 145 million americans. Senators question from a quebec ceo Richard Smith<\/a> at 10 a. M. Eastern. Thursday at 9 30 a. M. Eastern mr. Smith testified before the House Financial Services<\/a> committee. Live coverage of both hearings on cspan3, cspan. Org and the cspan radio app. Federal officials and the department of energy and Homeland Security<\/a> talked about Government Cybersecurity<\/a> initiatives at a house hearing tuesday. Topics include modernizing the federal government i. T. Systems and protecting the nations electricity grid. This household massacre subcommittee hearing is an hour. The committee on Homeland Security<\/a> subcommittee on cybersecurity, infrastructure","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia600400.us.archive.org\/4\/items\/CSPAN2_20171004_100300_Senate_Banking_Hearing_on_Wells_Fargo\/CSPAN2_20171004_100300_Senate_Banking_Hearing_on_Wells_Fargo.thumbs\/CSPAN2_20171004_100300_Senate_Banking_Hearing_on_Wells_Fargo_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240629T12:35:10+00:00"}