Since the scandal over Wells Fargo’s sales-tactics scandal busted open last month, the bank has gotten clobbered from every direction. Regulators, press, even Republican Senators have piled in a financial reenactment of the famous scene from "Airplane" where everyone in the cabin takes turns slapping a passenger having a panic attack.
This week is VICE News' turn to have a smack at the red wagon. In a report published late Monday, the “world’s preeminent youth media company” presented evidence that retail bankers at Wells Fargo were creating phony accounts under pressure from managers all the way back in 2005, six years prior to the earliest dates examined in the bank’s own review of account-opening shenanigans. These allegations back up prior reports that faulty incentives led to unauthorized accounts well before 2011.
What’s more, a whistleblower at the bank reportedly filed an ethics complaint over the matter and even sent a certified letter to Carrie Tolstedt, the executive who oversaw the units responsible for the wrongdoing. VICE reprinted the letter, which warned that bankers were “gaming” new accounts, precisely the behavior that earned the bank its $185 million fine last month—and lost Tolstedt her severance and $19 million in equity awards.
The details of the VICE story echo the unauthorized account-opening that the settlement with the Consumer Financial Protection Bureau outlined. In 2005, a Wells Fargo mortgage-holder named Bill Moore reportedly learned that three accounts had been opened in his name. This came as news to Moore, as the only service he’d requested from the bank was for a mortgage earlier that year.
The details on the account documents were clearly bogus. For example, the driver’s license number supplied was “MOOREWF00000.”
The news dropped the same day that Wells Fargo’s top brass told some 500 executives that, while the impact of the scandal would dampen sales for a time, third-quarter earnings wouldn’t take too hard a hit. Not that they want the general public to know that fact. “We probably won’t broadcast that because it might incentivize people to do more, to make it tougher on Wells Fargo,” John Shrewsberry, the bank’s CFO, said in a tape leaked to the Wall Street Journal. “The storyline is worse than the economics at this point.”
If regulators find more dirt to back up VICE’s reporting, however, that situation could change. Already analysts have estimated that a Department of Justice investigation could lead to a $2 billion fine for the bank. The CFPB’s consent order released the bank from liability regarding all prior sales improprieties, satisfied that the bank’s initial review of the period from 2011 to 2015 was adequate.
But other regulators might not be satisfied with that limited period. In his grilling at the Senate, CEO John Stumpf faced plenty of ire for missing the sales practices between 2011 and late 2013, the year that he said he first became aware of the scandal. “There’s no excuse that we didn’t connect it before,” Stumpf said at his Senate inquisition—a week before having $41 million in stock awards clawed back by the bank’s board.
If internal complaints over those practices actually date back to the mid-2000s, there are two possibilities: Either executives concealed the information for even longer than we knew, or they exhibited an even more egregious lack of awareness about goings-on within the company.
It’s not just the Department of Justice who might care to know how and when the complaints began. Other entities looking to take a whack at Wells Fargo include the Department of Justice, several state attorneys general, and plaintiffs in several class-action suits brought by customers and employees.
An interesting side-story stemming from these newest revelations could be renewed scrutiny of the CFPB. In a somewhat cynical move, some congressional Republicans used the opportunity of questioning Stumpf to lay into the CFPB for being asleep at the switch.
“Where was the CFPB? Why did they come in so late to the game?,” said Texas Rep. and Financial Services Committee Chairman Jeb Hensarling, who only last year pleaded, “Who will protect consumers from the overreach of the Consumer Financial Protection Bureau?”
But as it becomes clearer that Wells Fargo’s sins began well before the four-year period covered by its internal review, it’s worth asking why the CFPB looked back only to 2011. Since then, the bank fired 5,300 employees for sales improprieties that led to as many as 2 million fake accounts being opened.
But there’s no way that’s the full extent of the wrongdoing. Which leads us to ask: What will protect consumers from the underreach of the CFPB?