Federal banking regulators have released new information about actions that some of the nation’s largest banks are taking to prevent sales abuses, but Senate Democrats continue to push for more disclosure.
In a six-page letter sent to key Republicans and Democrats in Congress, Comptroller of the Currency Joseph Otting said that several banks have devised “fair banking” policies that address what employee conduct is expected and lay out repercussions for inappropriate actions.
Otting also described how some banks have been developing “sales practices dashboards,” which use data from various sources to monitor sales activity. He said that many banks have reassessed the design of their incentive compensation programs with the goal of reducing the potential for bad behavior.
The letter, obtained by American Banker, was sent to Capitol Hill on Monday, in advance of Otting’s appearances this week before House and Senate committees.
During those legislative hearings, Otting faced pressure to release more information about his agency’s review of sales practices at dozens of large and midsized banks. The review was launched back in 2016 in response to revelations that Wells Fargo employees had opened more than 2 million deposit and credit card accounts without customers’ consent. The company later uncovered another 1.4 million accounts that may have been opened fraudulently.
Otting confirmed that the Office of the Comptroller of the Currency issued 252 Matters Requiring Attention notices to the more than 40 banks that took part in the review, as was previously reported by American Banker.
But Democrats on the Senate Banking Committee are continuing to press for more information about any misconduct that the sales practices review uncovered.
“Consumers deserve to know whether the institutions with which they choose to bank engage in predatory sales practices,” eight Democratic senators, including Sherrod Brown of Ohio, Elizabeth Warren of Massachusetts and Robert Menendez of New Jersey, wrote in a letter to Otting on Thursday.
“Ultimately, failure to disclose detailed results of the review leaves the American public and bank investors blind to the possibility that Wells Fargo’s misconduct was an industrywide problem.”
Otting says that was not the case. In his testimony on Capitol Hill, he disclosed that the OCC reviewed between 500 million and 600 million new accounts that were opened at more than 40 banks during a three-year span and found that about 10,000 of them were unauthorized.
By contrast, some 3.5 million customer accounts at Wells Fargo were flagged as potentially unauthorized.
“This was not systemic across the banking industry. There were isolated cases of it,” Otting told the Senate Banking Committee on Thursday.
The letter that Otting sent earlier this week makes clear that the OCC’s review went beyond just looking for unauthorized accounts — it also evaluated incentive pay and sales quotas to determine whether banks were placing too much emphasis on hitting revenue targets.
The letter does not reveal much about what misconduct the agency found — no specific banks are named — though it does provide new details about areas in which banks are making changes.
For example, the letter notes that several banks have established new committees or risk units that are empowered to oversee and monitor companywide sales practices.
It states that some banks have changed their pay formulas in order to reduce the risk that employees will steer customers to particular products that offer bigger incentive payouts. Some banks have reworked those same formulas to focus on team productivity rather than individual employee performance, according to the letter.
Some banks have also expanded their use of mystery shoppers to monitor sales practices, the letter stated.
Julie Williams, a former OCC official who is now an industry consultant, and has been working with various banks in connection with the sales practices review, said that the amount of time that it will take to solve problems identified by the OCC varies.
“Some are fixable sooner, and others may require more work, and potentially upgrades of technology systems, in order for firms to update how they’re doing things,” said Williams, managing director at Promontory Financial Group.
She also noted that the OCC now has the ability to compare and contrast how various banks have responded to its review, and said that companies that have made fewer changes than their peers may be asked to do more.
In his letter to Capitol Hill, Otting emphasized how many changes banks have already made.
“The vast majority of banks covered by the review have strengthened policies, procedures, and controls and the risk governance framework over sales practices, as well as the design and execution of sales and incentive programs,” Otting said in the letter.
Wells Fargo has enacted many similar reforms to those that the OCC said other banks are implementing, including overhauling its formula for incentive pay.
Updated June 15, 2018 at 5:00PM: This story has been updated to add comments from former OCC official Julie Williams.