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Wells Fargo CEO Stumpf: ‘I Accept Full Responsibility’ For Unethical Sales Practices

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Wells Fargo CEO Stumpf: ‘I Accept Full Responsibility’ For Unethical Sales Practices

WASHINGTON—The top executive of Wells Fargo & Co. is expected to tell a congressional panel Tuesday that he accepts “full responsibility” for unethical sales practices in its retail banking business and apologize for “not doing more sooner” to address the cause of such behavior.

In a testimony to be delivered at a Senate panel, Wells Fargo Chief Executive John Stumpf said there was “no orchestrated effort or scheme” by the bank to encourage problematic sales practices.

“I am deeply sorry that we failed to fulfill our responsibility to our customers, to our team members and to the American public,” Mr. Stumpf said in the prepared remarks. “I accept full responsibility for all unethical sales practices in our retail banking business. I am fully committed to doing everything possible to fix this issue, strengthen our culture and take the necessary actions to restore our customers’ trust.”

A copy of the prepared testimony was reviewed by The Wall Street Journal ahead of a hearing Tuesday morning at the Senate Banking Committee.

Mr. Stumpf’s prepared remarks didn’t include the possibility of his resignation from the bank, which some critics have urged. Nor did he discuss plans for the bank to take back compensation paid to some top executives including himself, as has been suggested by some Democratic senators.

The chief executive is scheduled to deliver the testimony as lawmakers turn up the heat on the San Francisco bank, which agreed to pay a $185 million fine after regulators found it had opened about two million deposit and credit-card accounts without customers’ consent. Wells Fargo said it fired 5,300 employees over the sales practices during a five-year period ended in March of this year. A House panel is also expected to hold a hearing later this month.

The deeply apologetic tone of Mr. Stumpf’s testimony is in sharp contrast to his earlier comments. In an interview with The Wall Street Journal last week, he blamed employees for allegedly illegal sales practices and defended the bank’s culture, saying that “there was no incentive to do bad things.”

Separately, a top banking regulator is expected to tell lawmakers at the same hearing that his agency should have acted more quickly to catch misconduct at Wells Fargo. According to his prepared remarks reviewed by The Wall Street Journal, Comptroller of the Currency Thomas Curry said the enforcement case against Wells Fargo highlighted that the agency must continue to improve and refine its supervisory program, by sharpening early-warning processes and enhancing capabilities. That is particularly true, he said “with respect to our largest, most complex banks.”

Mr. Curry said he has asked a top official at the agency, the Office of the Comptroller of the Currency, to conduct a review of agency actions taken in the Wells Fargo case to “identify gaps in our supervision and assess any lessons the agency can learn from it.”

Mr. Curry also said his agency will review the sales practices of all the large and midsize banks it supervises.

The top regulator’s remarks come as some critics are raising questions about the roles of regulatory agencies, including why it took several years to catch the problematic behavior at Wells Fargo.

Mr. Curry also urged quick action by fellow financial regulators to approve proposed rules on incentive compensation, to ensure acceptable practices by corporate executives.

Los Angeles City Attorney Michael Feuer, also scheduled to testify at the hearing, is expected to say that his office heard from Wells Fargo customers who said their unauthorized accounts were sent to debt-collection agencies and their credit reports were hurt as a result.

Rep. Brad Sherman of California, a Democrat on the House Financial Services Committee, said last week that he and others would ask the Consumer Financial Protection Bureau to examine how many Wells Fargo customers had been indirectly hurt by the bank’s sales practices, including how many had their credit reports dinged because the bank opened multiple credit cards for them.

In his testimony, Mr. Stumpf gave details about steps the bank has taken to address the problems and to regain customers’ trust. He said that starting in 2013, the bank analyzed questionable behavior related to account openings at its branches and strengthened internal oversight to fix the problems uncovered. The company had already said, following the announcement of the enforcement action, that it was eliminating sales goals for retail bankers for all products.

“We should have done more sooner to eliminate unethical conduct and unintended incentives for that conduct to occur,” Mr. Stumpf said.

The chief executive added the bank fired the 5,300 employees as a result of its own oversight, not as a result of an investigation by the CFPB, one of the regulators involved in the case.

Source: The Wall Street Journal

By Pathay Singh on 09/19/16