Wells’ outside review of phony accounts expected in September

A long-awaited analysis of sham accounts opened at Wells Fargo will be released “within a few weeks,” CEO Tim Sloan said in a companywide message.

The third-party review will identify “potentially unauthorized accounts” opened between 2009 and 2016, according to the message, published in a company press release Tuesday. The review is based on account-usage patterns that raise red flags, such as credit cards that were issued but never activated.

Once the review is complete, Wells will begin the process of refunding fees that were charged to the accounts. The San Francisco company plans to send letters to affected customers, notifying them of the refunds.

Tim Sloan, president and CEO of Wells Fargo.
Tim Sloan, president and chief executive officer of Wells Fargo & Co., speaks during the Milken Institute Global Conference in Beverly Hills, California, U.S., on Monday, May 1, 2017. The conference is a unique setting that convenes individuals with the capital, power and influence to move the world forward meet face-to-face with those whose expertise and creativity are reinventing industry, philanthropy and media. Photographer: David Paul Morris/Bloomberg
David Paul Morris/Bloomberg

In his message, Sloan emphasized that not all accounts identified in the forthcoming review are necessarily fake. Instead, Wells has intentionally “cast a wide net,” choosing to issue refunds on accounts that fit patterns of improper sales activity, even if improper activity cannot be confirmed.

“Since our analysis was inclusive and erred on the side of the customers, this group most likely includes a population of accounts that were authorized by our customers,” said Sloan, adding that the review looked at patterns that “sometimes, but not always, indicate a lack of authorization.”

So far, Wells has issued more than $5 million in refunds and related payments, as the result of direct customer outreach, according to Sloan.

The forthcoming report is the latest step in the company’s yearlong effort to get beyond its bruising sales scandal.

Wells agreed last September to pay nearly $190 million to settle charges that more than 5,000 employees created roughly 2 million fake accounts to meet sales goals and collect bonus pay.

Sloan’s message to employees came just weeks after Wells warned in a regulatory filing that the results of the third-party review could show a “significant increase” in the number of unauthorized accounts.

Wells attributed the likely increase, in part, to its decision to expand the scope of its review. Last fall, Wells hired a consulting firm to analyze accounts opened between 2011 through 2015. The review was later expanded to cover a seven-year period, from 2009 through 2016, according to the Aug. 4 regulatory filing.

In his note to employees, Sloan downplayed the decision, which he said was made late last year.

“You may get the impression from some news stories that the expanded time period for our account review was ‘new’ news,” Sloan said. “That is not the case. While the final results will be new once received, we made the commitment to conduct this analysis over 10 months ago.”

Additionally, Sloan said that Wells will begin sending notices about its class-action settlement in the coming weeks. The notices will include information for customers about submitting claims.

A federal judge in June granted preliminary approval of a $142 million settlement, which includes customers affected by improper sales practices going back to 2002.

“We’ve heard customers’ concerns about potential harm to credit scores due to unauthorized accounts, and that’s why an important part of this settlement is remediation to customers for increased borrowing costs,” Sloan said.

For reprint and licensing requests for this article, click here.
Consumer banking Crime and misconduct Corporate governance Enforcement
MORE FROM AMERICAN BANKER

Acting CFPB Director Russ Vought has managed to neuter the Consumer Financial Protection Bureau through a series of actions. Senate Banking Committee Chairman Tim Scott, R-S.C., played a major role by cutting funding in half.

4h ago
7 Min Read
CFPB exterior no signage 4

Federal Reserve Chair Jerome Powell said there was a "high degree of unity" among committee members during this week's Federal Open Market Committee vote. Out of 12 FOMC members, 11 voted for a 25 basis point cut.

September 17
4 Min Read
Jerome Powell

The Federal Open Market Committee's decision to reduce interest rates for the first time in nine months lifted bank stocks Wednesday. The 25-basis-point reduction could lead to net interest income headwinds now, but loan growth later, analysts said.

September 17
4 Min Read

Community Financial in Syracuse has made its biggest investment ever in an outside company, taking a $37.4 million equity stake in an insurance provider that focuses on the rental housing market.

September 17
4 Min Read
syracuse, new york

St. Cloud Financial Credit Union will be issuing its own stablecoin at the end of this year, becoming one of the first U.S. credit unions to do so.

September 17
4 Min Read
BankThink on increased need for AML with stablecoins

The two BNPL giants' pay-over-time loans will now be available for in-store purchases on Apple Pay in a move to capture more sales at brick and mortar stores.

September 17
3 Min Read
Apple Pay