By Donna Westfall – November 13, 2016 –
Henry Wells and William Fargo founded Wells Fargo Bank in 1852. The company is 164 years old and based in San Francisco. The founders are probably turning over in their graves right about now.
In July 2015, it became the world largest bank, but by September 2016, it slipped below JP Morgan Chase Bank in the wake of a scandal involving the alleged creation of over 2 million fake bank accounts costly financial products that their customers didn’t request by thousands of Wells Fargo employees. For that they were fined $185 million by California and Federal regulators.
In a separate action, they agreed to pay $4.1 million to settle allegations that it charged illegal fees and misled student-loan borrowers.
And then they were hit with a class action lawsuit involving 250,000 mortgage customers for cheating them by marking up certain fees when homeowner’s were in default on their loan. This time the banking giant agreed to settle for $50 million and the offer still needs the approval of the Oakland, California court. The complaint was filed in 2012 and accused the bank of marking up fees like appraisals which cost the bank $50 but turned around and charged $95 to $125 fraudulently concealing them in categories like “Other Charges” or “Other Fees.”
The company known best for it’s stagecoach drawn by horses, has weathered depression and war, peace, social changes and communication changes. They will probably weather this latest storm of lawsuits and settlements, but one has to wonder how because the scandals and legal problems may not be over yet.
Former CEO, John Stumpf bears the blame for creating incentives for employees to set-up credit card and deposit accounts. Employees looking for bonuses began setting up accounts without customer permission. Stumpf stepped down from that position in October. Billionaire, Warren Buffet, who holds 10% of Wells Fargo stock, said that Stumpf is a decent man that made a hell of a mistake. and then didn’t correct it. 5,300 employees were fired over 2 million phony accounts. According to the Consumer Financial Protection Bureau, the bank has said it will pay full restitution to all victims.
56 year old, Tim Sloan, Chief Operating Officer, has replaced Stumpf as CEO. Over the last year stock prices have ranged from $45+ to $56+ currently at $51.73 as of the close of November 11th.
Stumpf worked for Wells Fargo for 34 years, was CEO since 2007, and walked away with $134.1 million retirement. Bear in mind that two congressional committees, the Senate Banking Committee and the House Financial Services Committee grilled him for hours. He wasn’t planning on resigning, but representatives on the committee called on him to resign. Wells Fargo Bank’s once stellar reputation is going to have to endure major changes to regain consumer’s trust.