Six months after the phony-accounts scandal at Wells Fargo began to unfold, two banks with otherwise pristine brands are confronting public complaints from employees of high-pressure sales environments, and they probably won’t be the last ones to do so.
TD Bank Group addressed accusations, first aired on a Canadian broadcast network this month, that branch employees intentionally crossed the line to meet sales goals, such as increasing overdraft protection limits without consumers’ consent. CEO Bharat Masrani defended the company in a statement on March 12, and the Canadian banking regulator a few days later said it would conduct a review of sales practices across the industry.
Additionally, the Committee for Better Banks — a labor advocacy group that was instrumental in publicizing the case against Wells — showed American Banker a letter it said it is planning to send investors soon that alleges aggressive sales and collections goals at the call centers of U.S. Bancorp. A spokesman for the Minneapolis company declined to comment on the committee’s accusations, though CEO Richard Davis said after the Wells scandal broke that U.S. Bancorp does not track cross-selling ratios and “each bank needs to … do right by its customers.”
No evidence has been presented in either case showing widespread harm to consumers, such as the creation of millions of sham accounts. But the complaints against both banks illustrate a lingering effect of the Wells scandal: The industry is more vulnerable, and the broader public is more sensitive, to accusations of pressure-cooker work environments on banking’s front line, observers said.
The public airing of employee grievances also raises important questions for executives across the industry. What’s the best way to keep tabs on potentially inflammatory workplace issues in a sprawling organization? And how can banks make sure they foster an ethical sales culture?
“I think it’s a game-changer,” said Daniel Stipano, a partner at BuckleySandler, discussing the impact of the Wells scandal. Bank executives “have to be more careful in terms of addressing claims of abuse, whether it’s by customers or employees in the situation.”
Stipano, who previously worked in enforcement at the Office of the Comptroller of the Currency, noted that most banks took immediate steps after the Wells case to assess their sales incentives and closely monitor branch activity. Still, maintaining an ethical sales culture is an ongoing process, he said.
“I think it was a wake-up call,” said Meny Grauman, an analyst with Cormack Securities in Toronto, discussing the Wells case and the similar accusations made against TD.
Grauman said he views the TD complaints as isolated events, rather than indicative of broader systemic problems at the bank, given the evidence he has seen so far. “At this stage I wouldn’t put them on par with what happened at Wells. We’ll have to see what lessons get drawn from them.”
The complaints come in the wake of the sham accounts scandal. Wells in September agreed to pay $190 million to settle charges that more than 5,300 employees created roughly 2 million fake accounts to meet sales goals and collect bonuses.
The settlement quickly snowballed into a full-blown reputational crisis for Wells, once a marquee brand in the industry. Former CEO John Stumpf and former head of retail Carrie Tolstedt resigned in early October. Stumpf and Tolstedt were also forced to relinquish $41 million and $19 million of their stock compensation, respectively.
Amid the fallout from the scandal, the OCC launched a review of sales practices across the industry.
Metrics-focused sales environments have been a focus of other regulatory actions in the industry. In January, the Consumer Financial Protection Bureau filed a lawsuit against TCF Financial, arguing that the company tricked consumers into signing up for overdraft protection. In announcing the lawsuit, the agency noted that the Wayzata, Minn., bank held parties for employees who hit certain milestones, such as getting 500,000 consumers to sign up.
The agency also drew comparisons between the situations at Wells and TCF.
“The employees at TCF pushed consumers into costly overdraft products,” Chris D’Angelo, an associate director at the CFPB, told reporters when the suit was announced. “We absolutely see the parallel here; much in the way of Wells Fargo, there were incentives.”
TCF has vowed to fight the lawsuit.
For activists who have been trying to organize low-wage workers in the industry, and draw attention to the challenges they face, the public outrage sparked by the Wells scandal presented a window of opportunity.
“It wasn’t just about shady bank workers defrauding customers,” said Shannon Bade, an organizer with the Communications Workers of America, who is affiliated with the Committee for Better Banks. “It was that they were being paid $12 per hour and living in L.A., and the only way they could make money was by creating fraudulent accounts.”
The challenges illuminated by the Wells case are common in the industry, said Bade, who has been involved in efforts to organize workers at U.S. Bancorp.
“The Wells Fargo situation shined a lantern on something that nobody thought was a problem,” Bade said.
But Bade said that U.S. Bancorp employees from the collections, corporate accounts and online applications departments recently met with human resources, to share a number of concerns. The employees took issue especially with compensation plans for low-wage workers, which they say include a high level of variable and hard-to-predict bonus pay.
Roughly 60% of some employees’ take-home pay comes from bonuses, the committee writes in a letter it said it plans to send to shareholders that complains of Wells-like “unreasonable sales and debt-collection goals” that encourage “high-pressure sales, duplicity and excessive fees.”
After not hearing back from the bank, the employees decided to take their concerns public, with the assistance of the Committee for Better Banks, said Bade.
At TD, the public outcry over media reports of aggressive sales tactics — including claims that bankers increased consumers’ lines of credit to meet goals — prompted the Toronto company to issue a statement Sunday.
“We have a balanced approach in how we evaluate and compensate our people based on a variety of factors, including customer experience, team and individual sales and how well they demonstrate our company values,” Masrani said in the March 12 statement.
TD closely monitors sales practices to detect any issues, Masrani said. He noted that the company also tracks customer complaints, and only a “few hundred” of those complaints related to sales practices in the past year had to be referred to higher levels, he said.
Stipano, the BuckleySandler attorney, said that many of the questions that executives should be asking themselves in the wake of the Wells scandal — and the subsequent complaints that emerge — are simple, but getting reliable answers is hard.
Stipano said bank executives should take a tough look at the tone that they set at the top of the organization, and whether the right messages are filtering through to the bottom ranks of the company. He also said banks should review the types of behavior that are rewarded in compensation plans, as well as the language used in scripts for front-line workers. Moreover, banks should look out for any “red flags” in their account-level data, such as a sharp uptick in new accounts in certain locations, he said.
Finally, it’s important to look at whether a company has an independent compliance division, operating separately from the revenue-generating lines of business, Stipano said. Banks that don’t have an independent compliance division can be susceptible to trouble.
“Culture is a difficult thing,” Stipano said. “It’s difficult to establish, and once it’s established it’s difficult to change.”