Wells Fargo (NYSE:WFC) Executive Of Fined Unit Gets $125M Payday
(USA Today) – A Wells Fargo executive who oversaw the unit that created 2 million unauthorized customer accounts is retiring from the company with a golden parachute worth $124.6 million, according to a news report. Carrie Tolstedt was the head of Wells’ Community Banking division. She announced her retirement in July at age 56 and was scheduled to retire at year’s end, according to a release by the bank.
RBC opined in a recent note:
While the agreements reached were more significant than we had expected, we note that the affected accounts were a fraction of 1% of the accounts reviewed. Furthermore, it does not appear that the agencies imposed any formal sanctions on the company. At the end of the day we do not expect Wells to materially shift away from its successful organic growth strategy of deepening customer relationships and improving cross-sell ratios across its businesses. That being said, this agreement is disappointing and could lead to other headline issues and/or greater regulatory scrutiny of the company over the near-to-intermediate term.
On a recent conference call the company stated:
I’m sure most of you have seen, last week we reached settlements with the CFPB, the OCC, and the City of Los Angeles over allegations that some of our retail customers may have received products and services they did not authorize. We entered into these settlement agreements to take responsibility for customer interactions that were not handled as they should have been and to put the matter behind us. The amount of the settlements was $185 million, which was fully accrued for at the end of the second quarter.
Let me provide some context regarding the accounts included in the review process. We commissioned a third-party consulting firm to conduct a review of all of the deposit and credit card accounts opened since 2011, which included 82 million deposit accounts and nearly 11 million credit card accounts. Of these 93 million accounts reviewed, approximately 2% were identified as accounts where we could not rule out the possibility that an account was unauthorized. We included these accounts in a further review to determine if any were due a refund. Based on that review we identified approximately 115,000 accounts, or 0.12% of the 93 million accounts examined, that had incurred fees where we could not rule out the possibility that they may not have been warranted. We’ve refunded a total of $2.6 million to those customers, an average of $25 per account.
We take this issue very seriously. The Wells Fargo culture is committed to the best interest of our customers and providing them with only the products and services they want and value. We’ve made fundamental changes as a result of our findings, including taking disciplinary actions such as terminations of managers and team members who acted counter to our values.
These terminations were a result of our own internal investigations as part of our internal controls and did not happen all at once, but took place over the last five years. The terminations have declined every year since 2013, but on an annual basis represented approximately 1% of the team members that worked in our stores each year.
We’ve made significant investments in enhancing training, monitoring, and controls, including strengthening our policies, processes, and systems to more effectively ensure appropriate products and services are delivered to our customers. For example, we invested $50 million on monitoring banking activities, including increasing the number of people dedicated to oversight and adding a Mystery Shopper Program with an external vendor, conducting over 15,000 visits a year. We’ve made changes to our performance expectations at all levels of the organization, including putting greater priority on customer service, loyalty, and ethics.
We have also worked to enhance transparency and ensure customers are receiving the right products. For example, an hour after opening a new deposit account at Wells Fargo, our customers are now sent a welcome email including a summary of what bank accounts were opened and telling them how to get the most value from their accounts.
This morning we took the further step of announcing the elimination of sales goals in retail banking, effective January 1, 2017. We’re making this change because we want to make certain that our customers have the full confidence that our retail bankers are focused on their best interests. We believe this decision is good for our customers and our business.
Our commitment to our shareholders, to our customers, and to our team members is to take every opportunity to reinforce the values and principles of always putting our customers first. I know this is an important topic and something you may want to talk something more about, but I also want to share some other areas of interest, and then I’ll be able to take questions, including questions on this matter, at the end of my remarks. So we’re going to move on to some regular business.