Ceo Timothy Sloan appeared before the Senate Banking committee yesterday. He testified on the banks business practices. Last year the bank was found to set up several unauthorized accounts without customers knowledge. Mr. Sloan was asked about changes that were made in light of that disclosure and how the company was complying with federal regulations. This is about two hours. This hearing will come to order. Before we begin today, let me acknowledge that our nation is still mourning and remembering the lives lost in las vegas. Our condolences go out to the families effected by this heinous crime and our thanks go to the courageous First Responders and police and citizens who put their lives on the line to save others. Two members of this committee, both of the senators of nevada, are absent today because they are in nevada. And i know that senator heller and cortezmasto are doing all they can there and we will remain united in prayer and support with them during this difficult time. Today were going to hear testimony from wells fargo chief executive officer and president tim sloan. Welcome, mr. Sloan. Thank you. Just over a year ago former wells fargo chairman and chief executive officer john testified. Of the many issues emphasized by the Committee Members during that hearing, one was the need to hold executives accountable and to ensure that customers impacted would be made whole. Mr. Stunford repeatedly repeated that the bank would take actions to restore investors trusts in the company. Incidents like this remind us how important it is for companies to Institute Policies and procedures that foster customer protection, promptly identify and treat customers fairly. Since that hearing, wells fargo has made changes to its corporate and managerial structure in an effort to daes the concerns. However new developments in the disclosures at the bank during the last year merit new scrutiny. On august 31, 2017, wells fargo announced the results of an expanded review of Retail Banking accounts which included accounts opened between january 2009 and september 2016. The expanded review found the number of potentially unauthorized accounts was 3. 5 million instead of 2. 1 million. Separately the Company Discovered problems with respect to its auto collateral protection insurance or cpi program and selfreported these issues to its regulators. In response to complaints, wells fargo received policies purchased on behalf of customers between 2012 and 2017 and found that up to 800,000 customers may have been harmed by wells fargos cpi practices. The end result was that customers were charged for Car Insurance that they did not need and some had their vehicles wrongfully repossessed. For families having your car repossessed or credit compromised is devastating. These new developments raise a number of questions that wells fargo must answer. Including what has wells fargo done to ensure that customers effected by any of these issues are or will be made whole. In more complex cases where customers Credit Scores were negatively effected how is wells fargo working with other parties to restore those Credit Scores and return amounts where customers experienced higher borrowing costs. What structural changes has wells fargo in the last year to address both past issues and new revelations and what evidence is there that new policies and procedures are effected . Finally, as members asked last year what has been the involvement of regulators since the incident the initial incident and in response to the new disclosures . We welcome your comments on these matters, mr. Sloan. And before we get to the testimony, senator brown. Thank you, mr. Chairman. I echo your comments about citizens of las vegas and those many visitors that also lost their lives that were injured in that terrible shooting. Our hearts go ought to all of them and their families. Special concern also to senators heller and cortezmasto on this committee. I hope after every tragedy, we always say our hearts and minds go out to their victims. I hope that the United States will actually do something about this for a change. A year ago then wells fargo ceo john stump sat in this hearing room attempting to explain the inexplicable banks punitive sales goals has pressured its employees to opening over fraudulent accounts and credit card accounts. Committee democrats asked mr. Stump if he was confident that this type of fraudulent activity existed in no other part of wells fargo. We asked about a variety of products including insurance. On november 15th, 2016, wells fargo responded, quote, we believe that the activity at issue here was limited to Certain Team Members within the Community Bank division. Weve learned over the past year that the problems at wells are much larger and more systematic than the bank originally disclosed before being forced to come clean by a multiagency investigation, wells fargo went to Great Lengths to bury, to bury this scandal. Its subjected customers to forced arbitration, preventing them from their day in court, further concealing the fraud. Employees let me give examples, employees who tried to alert Senior Management to the treatment of wells fargo customers were silenced or fired. 2013 a california customer sued claiming wells had opened several unauthorized account in his names. Wells fargo forced, forced that case out of the courts and into nonpublic arbitration claiming that the terms of a real account should govern the fake ones. Think about that. Using forced arbitration, wells forced that case out of the courts and into nonpublic arbitration claiming that the terms of a real account should govern the fake ones. In 2015, another customer in california filed a class action against wells for the same practices. And the bank again used its fine print legalese to fight to keep the case under seal. Again using forced arbitration. Has the Company Changed . Just two months ago wells used its forced arbitration claws again to argue that it shouldnt have to pay customers it cheated on Overdraft Fees. In august of this year wells finally disclosed a number of fraudulent accounts was at least 3. 5 million. 70 higher than it originally reported. The bank revealed that it stuck 800,000 customers with Auto Insurance policies as chairman crapo said without telling them or checking to see if they already had insurance. The bank was aware of these problems in its auto Loan Division in july 2016 yet wells ceo told this committee that fraudulent sales practices were limited to the Community Bank. This was not a casual response to a question that caught somebody off guard at a hearing. It was a written response that was undoubtedly approved by lawyers and others at the bank, maybe even you mr. Sloan, were among those who saw the response before it was sent to congress. A week after last years hearing the board of directors initiated its independent review of the Company Sales practices. The report to the board whose members i might add are paid an average of 370,000 for parttime job, 370,000 to prepare for and attend several meetings a year found that the fault lay elsewhere. Thats called comfort to the thousands of employees who make perhaps 1 10 of what these Board Members make who were fired for failing to generate enough new accounts. The board chose to limit the scope of the review to the Community Bank which is troubling. It shouldve known or should have wanted to know that additional problems existed in other divisions. The changes, mr. Sloan that his team made have made are not sufficient to reform a Corporate Culture that is willing to abuse its customers and employees in an effort to pad its numbers and in an effort to increase executive compensation. In light of the millions of americans defrauded the recent Equifax Breach that compromised 145 million americans personal Financial Information and the sec 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 forced arbitration in payday lending and Debt Collection and Mortgage Servicing and credit reporting accuracy rather than working to roll back, we should be supporting the Consumer Financial protection bureau, we should be supporting other financial watch dogs that stand up for hard working americans when Big Companies take advantage of them. Thank you, mr. Chairman. Thank you, senator brown. We will now proceed to testimony from mr. Tim sloan, the chief executive officer and president of wells fargo and company. Mr. Sloan, your written statement will be made a part of the record in its entirety and you may proceed with your oral remarks. Chairman crapo, Ranking Member brown and members of the committee, my name is tim sloan and im the ceo of wells fargo. I want to thank you for the invitation to the hearing on the wells fargo one year later. This was a year of disappointment and transition at wells fargo. When my predecessor testified here last year we hadnt fully grappled with the damage, the sales practices scandal had done to our customers, our team members and their trust in our bank. We recognize too late the full 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 and i herald our customers and our team members. I heard them loud and clear. You expect us to do better and so do we. So let me be very clear, i am deeply sorry for letting down our customers and our members. I apologize for the damage done to all the people who work and bank at this important american institution. When the challenges at wells fargo demand the Decisive Action we acted too slowly and too incrementally. That was unacceptable. I also want to be clear about another thing. Wells fargos a better bank today than it was a year ago and next year wells fargo will be a better bank than it is today. That is because weve spent the last year determined to earn back the publics trust. Since i became ceo 11 months ago, my team and i have been focused on three tasks were here to discuss today. First, in response to the sales practices problems announced in 2006. Second, we are reviewing operations and increasing accountability across the entire company. Now when a concern emerges we identify it quickly, we escalate it promptly. We disclose it appropriately and we address it fully. We will demand individual executive accountability. We have clawed back 180 million in Senior Executive compensation and we have fired senior retail, mortgage and auto lending executives for not performing up to the standards our customers deserve. Third, we are compensating every customer who has suffered because wells fargo made mistakes. Last year we reviewed 93 million open accounts opened between 2011 and 2015. This year we went back and took an even closer look at 165 million accounts opened between 2009 and 2016. Just as we expected we found more accounts that should not have been opened. This was not new potential misconduct since last year. It all happened before 2017 but it is a very serious issue all the same and we are completely committed to fixing it. Of the 3. 5 million potentially unauthorized accounts, about 190,000 incurred 6 million in fees and charges. Wells fargo is refunding every nickel and we are paying 142 million to compensate all effected customers including for increased borrowing costs from credit score impacts. Apart from this formal reimbursement mechanisms wells fargo is committed to addressing any concern that any of our customers may have about an unwanted product or service no matter where or when it may have occurred. If there is a problem, we want to hear about it. This past year has been humbling and challenging. My number one job as ceo is to make sure that nothing like this happens again as wells fargo. Fortunately joining me in this big task are 270,000 outstanding Wells Fargo Team members. Im proud of their hard work and want to thank them for their commitment to making things right. I see improvement every day and so do our team members. I think our customers have noticed the improvement too. I pledge to you that we will not stop until we restore our Customers Trust and make wells fargo the finest and most Ethical Company it can be. Thank you again for the opportunity to address the committee. I look forward to your questions. Thank you, mr. Sloan. In our hearing last year members of this committee asked many questions about how customers and consumers whose Credit Scores were impacted would be made whole. In cases where customers Credit Scores were negatively effected how is wells fargo working with other parties to restore those Credit Scores and in cases where customers experienced higher borrowing costs reimbursing those costs . Chairman crapo, were doing that in a few ways. First and foremost, we went to the Credit Bureaus and provided the names of our customers who accounts could have been inappropriately opened. Unfortunately, because of regulation the Credit Bureaus couldnt provide us with the detail of those customers back to us. What we saw when we looked at that is about 40 of those customers had no use of their the trade lines within a year so their credit was not impacted. Of that remaining 60 , about 25 had no impact on their Credit Scores. We found that the median impact the mean impact was about 4 points but numbers are just numbers because certainly more customers were impacted and some could have been impacted Credit Scores by more than four points. What we did was we reached out to 43 1 2 million Small Business and consumers and said if you have an issue come into wells fargo and see us and we will make it right. Approximately 41,000 customers have come in based upon that, about half had credit related issues and weve made it right for those customers. In addition as part of the 142 million settlement that i mentioned, the lions share of those funds are going to go to customers whose credit score have been impacted so were going to be working with the experts, the attorneys for the class have provided, were going to provide them with whatever information they want. Were reaching out to those 43 million customers again as well as tens of millions of former customers to make sure that they know about the Class Action Settlement so that they can be made whole as part of that settlement for any credit impacts. Thank you and some of the actions required by regulators as a part of your september 2016 settlements include the establishment of a Compliance Committee carrying out and enterprisewide risk review of sales practice risk and maintaining enterprisewide sales practice Risk Management and oversight. What is been the involvement of regulators since the initial incident including in response to the new disclosures about the increased amounts of unauthorized accounts as well as the cpi issues . We have an active dialogue with our regulators, the Federal Reserve, the occ and the cfbd when were talking about bank related issues so theres a tremendous amount of dialogue. For example, as it relates to the clat ral protection or cpi issue, when that got escalated in the Third Quarter we reported it to our regulators on a realtime basis and weve been working with them not only to keep them apprised of those issues but also in particular with the occ working with them to make sure that the remediation plan we had for any customer that was impacted by cpi is acceptable. As it relates to the fundamental changes that ive made since i became ceo, weve done the following things. First and foremost, weve centralized all of our enterprise risk and control activities. That was one of the failings that the report from the independent board of directors found and we agree with that. So those have been centralized. Were hiring a new compliance officer. Weve completed and devised a new compliance plan. Weve created a conduct office in the centralized risk group that independently brings up and complaints, ethics line issues so we can connect the dots better than we did a year ago. Senator brown . Thanks, mr. Chairman. I dont think we have a good answer yet mr. Sloan as to how and why this activity went on for so long at your bank. The Company First blamed rogue employees. Were trying to meet unrealistic sales goals. Then blamed the Senior ExecutiveVice President for Community Banking who earned 9 million in 2015 then finally john stump the chairman who earned 19 million that year. Youve been at wells fargo for a long time, 30 years youve been coo, chief Administrative Officer which includes overseeing insurance. Was there no point mr. Sloan prior to 2015 with the lawsuits and the terminatio