Wells Fargo News

Wells Fargo & Co. has fired more than 100 employees that the financial services company suspected of underhandedly collecting COVID-19 relief funds. Bloomberg News first reported the incident based on information from a person with knowledge of the situation.

Wells Fargo says members of its staff committed fraud against the Small Business Administration (SBA) “by making false representations in applying for coronavirus relief funds -- specifically the Economic Injury Disaster Loan program (EIDL) -- for themselves,” according to an internal memo reviewed by Bloomberg.

“We have terminated the employment of those individuals and will cooperate fully with law enforcement,” David Galloreese, Wells Fargo’s head of human resources, said in the memo. “These wrongful actions were personal actions, and do not involve our customers.”

More than 500 JPMorgan employees were also caught pulling the same stunt just last month. The mere fact that so many could easily tap into the EIDL program sent shockwaves through the company, leveraging an internal probe. 

How the employees pulled this off

Unlike other business owners and employers, banks have the right to check whether employees had aid deposited into their accounts. Sensing that, the SBA pressed banks to look out for suspicious deposits from the program -- both to their customers and also their own staff. 

One particular aspect of the EIDL program that was evidently too good to pass up was financial advances of as much as $10,000 that don’t have to be repaid. A Bloomberg Businessweek analysis of SBA data in August identified at least $1.3 billion in suspicious payments.The SBA’s inspector general also admitted that more than $250 million in aid was likely given to ineligible recipients in addition to $45.6 million in duplicate payments.

Federal and state authorities have launched an investigation into Wells Fargo’s lending practices under the government’s small business relief effort, the Paycheck Protection Program (PPP). 

Wells Fargo is one of several banks being sued over allegations of unfair practices in processing loans under the program. Lawsuits have also named Frost Bank, JPMorgan Chase, US Bancorp, and Bank of America. The banks have been accused of processing applications for larger loans more quickly than smaller loans. 

Wells Fargo disclosed details of the investigation in its quarterly earnings filing with the Securities and Exchange Commission (SEC). The nation’s fourth largest bank said that some elements of the probe have already progressed to the formal stage. 

Last month, just three days after announcing its participation in the PPP, the bank announced that it would stop accepting new loan applications under the program. The company said it made the decision in part because the Federal Reserve had imposed a cap on how many loans it could make as a penalty for its past blunders. 

“Today, the company continues to operate in compliance with an asset cap imposed by its regulator due to actions of past leadership,” Wells Fargo CEO Charlie Scharf said in April. “We are committed to helping our customers during these unprecedented and challenging times, but are restricted in our ability to serve as many customers as we would like under the PPP.” 

Facing investigation 

After it came to light that Wells Fargo had created millions of checking and credit card accounts without customers’ knowledge or permission, the Fed capped the amount of loans it could offer. 

Upon announcing its participation in the PPP, Wells Fargo said it would limit the amount of money it loaned through the program to $10 billion. The emergency assistance would only be extended to companies with fewer than 50 employees or to non-profit organizations. 

In an interview with Reuters, Wells Fargo spokesperson Manuel Venegas said that small businesses with fewer than 25 employees accounted for 90 percent of the applications and that median loan requests were under $110,000. 

Without elaborating further, Wells Fargo said Tuesday in a regulatory filing that it has received "formal and informal inquiries from federal and state governmental agencies regarding its offering of PPP loans.” 

In the midst of the coronavirus pandemic, the Federal Reserve will temporarily let Wells Fargo exceed the asset capacity it imposed on the bank in February 2018. 

The central bank put the cap on the bank after it came to light that Wells Fargo had opened millions of accounts in customers’ names without their knowledge or permission. The bank is still working to improve its reputation in the wake of the scandal. 

The Fed announced Wednesday that it will let Wells Fargo exceed the $1.95 trillion cap in order to allow it to participate in the emergency small business stimulus loan program, known as the Paycheck Protection Program.

“Due to the extraordinary disruptions from the coronavirus, the Federal Reserve Board on Wednesday announced that it will temporarily and narrowly modify the growth restriction on Wells Fargo so that it can provide additional support to small businesses,” the Fed said in a statement.

Still being held accountable for past actions

The Fed’s decision comes a few days after Wells Fargo announced that it wouldn’t be able to fully participate in the program. On Sunday, Wells Fargo said its participation would be limited to $10 billion due to the regulatory restrictions. 

"While we are actively working to create balance sheet capacity to lend, we are limited in our ongoing ability to use our strong capital and liquidity position to extend additional credit," said Wells Fargo CEO Charles Scharf.

In a separate statement, Scharf said the Fed’s temporary lifting of the restriction “does not, and should not, in any way relieve us of our obligations” under the 2018 consent order.

“While the asset cap does not specifically restrict Wells Fargo’s participation in this program, this action by the Federal Reserve will enable Wells Fargo to provide additional relief for our customers and communities,” Scharf said.

The Fed issued a similar statement, saying that it “continues to hold the company accountable for successfully addressing the widespread breakdowns that resulted in harm to consumers identified as part of that action and for completing the requirements of the agreement.”

Wells Fargo reopened its PPP website for applications on Wednesday.

Following a whirlwind of scandals and regulatory actions, Wells Fargo CEO, president, and board member Tim Sloan has announced that he will be stepping down from his position at the company effective immediately. The executive said he would fully leave the company and enter retirement at the end of June.

“It has become apparent to me that our ability to successfully move Wells Fargo forward from here will benefit from a new CEO and fresh perspectives. For this reason, I have decided it is best for the Company that I step aside and devote my efforts to supporting an effective transition,” Sloan said.

In a news release, Wells Fargo said that C. Allen Parker will serve as interim CEO and president until the company can complete an external search for a new candidate to replace Sloan.

“Tim Sloan has served this Company with pride and dedication for more than 31 years, including in his role as CEO since October 2016. He has worked tirelessly over this period for all of our stakeholders in the best long-term interest of Wells Fargo,” said Wells Fargo Board Chair Betsy Duke. “His decision, and today’s announcement, reflect that commitment and his belief that a new CEO at this time will best position the Company for success.”

Scandals abound

Sloan’s departure from the company follows years of hardship at Wells Fargo, which has found itself at the center of several high-profile scandals..

Back in 2016, the bank admitted that its employees had opened millions of accounts in customer’s names without their knowledge or consent. Over the next two years, the company would also face charges related to wrongful home foreclosures, hidden auto loan insurance policies, and various investigations brought by all 50 U.S. states.

In response to Sloan’s retirement, consumer watchdog Allied Progress said that the move was a necessary one. However, the group says Wells Fargo has a long way to go to make up for its past transgressions.

“While this is certainly good news for consumers after so many bad headlines about ongoing abuses at Wells Fargo, let’s be clear: the culture of greed at Wells Fargo and other major banks goes beyond one CEO,” the group said in an emailed statement to ConsumerAffairs.

“Sloan stepping aside won’t magically solve what are obviously deep, systemic problems within these institutions that continue to test regulators and see what they can get away with.”

As the result of a recent settlement with all 50 states, Wells Fargo has established a program to help consumers wronged by the bank’s various consumer law violations get relief.

The dominoes began to fall in September 2016 when the bank revealed that employees had opened millions of checking and credit card accounts without customers’ knowledge or permission. The bank paid a huge fine and the CEO took early retirement.

Later, it was revealed the bank had taken other shortcuts that cross legal and ethical lines. Wells Fargo admitted it had sold unnecessary insurance to some auto loan customers without their knowledge. It also revealed it charged some improper fees to some mortgage customers.

Then in 2017, the company acknowledged that it didn't offer mortgage modifications to hundreds of more borrowers who could have qualified for them. Many of those customers eventually lost their homes to foreclosure.

‘Perplexed and outraged’

“Customers of Wells Fargo were perplexed and outraged after the bank improperly enrolled them into programs and policies they did not want,” said Florida Attorney General Ashley Moody. “With this redress program now in place as part of our multistate action, customers will be able to contact Wells Fargo directly and get a quicker response to questions about their eligibility for relief.”

Wells Fargo has established separate call centers for each infraction to handle consumer inquiries. Consumers with questions or concerns may call the following Wells Fargo escalation phone numbers:

• Unauthorized Accounts / Improper Retail Sales Practices: 1(844) 931-2273

• Improper Renters and Life Insurance Referrals: 1(855) 853-9638

• Force-Placed Collateral Protection Auto Insurance: 1(888) 228-9735

• Guaranteed Asset/Auto Protection Refunds: 1(844) 860-6962

• Mortgage Interest Rate Lock Extension Fees: 1(866) 385-5008

Final settlement

The escalated redress program was the result of a December settlement with the attorneys general of all 50 states and the District of Columbia, which resolved charges that the bank violated state consumer protection laws.

The settlement also requires Wells Fargo to establish and maintain a website containing information to help consumers determine if they are eligible for redress. The bank is also required to provide periodic reports to the states about its ongoing remediation efforts.

Wells Fargo has agreed to pay the state of California $5 million to settle claims that the financial services company established insurance policies for its customers, and then charged them without their approval.

In addition, the company also agreed to surrender its insurance licenses for two years and to pay an additional $5 million if it decides it wants to sell insurance in California at any time in the future.

The genesis of Wells Fargo’s consumer breach dates back to 2008 when company employees would, on occasion, tell consumers to enter their personal information on a policy application simply to receive a quoted rate. However, that rather innocent act took a wrong turn when company employees later submitted the application to the insurer to purchase the policy without getting consumers’ permission.

"The Department of Insurance’s investigation found that Wells Fargo was signing up and charging customers for insurance without their consent," said California Insurance Commissioner Dave Jones. "Banks and other financial institutions should never be allowed to prey on their customers’ trust without being held accountable."

In a statement, Wells Fargo spokeswoman Catherine Pulley said that the company has worked to make things right for customers and earn back their trust and had previously stopped issuing new insurance policies.

It’ll be awhile before Wells Fargo gets a good night’s sleep. This move comes on the heels of the company agreeing to pay $575 million to settle allegations made by all 50 states and the District of Columbia that the bank violated consumer protection laws.