It was big news earlier this month when headlines in papers across the country announced that Wells Fargo had agreed to pay $185 million in fines because its employees, under extreme pressure from management, had opened more than a million bank accounts, some of which were opened without customers’ knowledge.
This huge story continues to make headlines: On Tuesday members of the Senate Banking Committee grilled Wells Fargo C.E.O. John G. Stumpf for more than two hours.
The occasion gave Banking Committee members an opportunity to grandstand and expel their wrath at Stumpf for firing more than 5,000 employees — although not a single one in senior management, where the pressure originated and was maintained.
Scott Reckard
One thing I think is important for people to know — although relatively few people ever will — is this snowball ball started rolling because, three years ago, an editor at the Los Angeles Times sent an email to the paper’s banking reporter, E. Scott Reckard, about something that had been called to his attention.
Here’s how Reckard, who retired last year, explained it to the Columbia Journalism Review in an article published Sept. 12.
“I got an email from one of the editors, Pat McMahon, saying there was this weird story. I talked to this [Wells Fargo employee] who claimed he had signed people up for accounts and services they didn’t need, but never without them knowing it—he would just talk them into it. Anyway, he told a story about these incredible pressures to make sales numbers and about how the branch had basically been setting records and getting kudos for doing this, but then people started complaining, and some trouble came down. Before too long, all these people got fired, these front line workers. He said all they were doing was responding to pressure from above and coaching from above about how to get the numbers up.”
If he wasn’t conscientious, Reckard probably could have blown off the editor, saying it was an aberration. Instead he jumped right into it, and on Oct. 3, 2013, the paper ran a 12-paragraph story saying Wells Fargo had fired about 30 branch employees in the Los Angeles region for opening accounts that were never used and attempting to manipulate customer satisfaction surveys.
What happened next took Reckard by surprise:
“(T)he phones started ringing off the hook and the emails started landing from people all over the place. Mainly current and former Wells Fargo employees, but customers too. They wanted to tell stories about what had happened to them.”
With the help of another editor, Brian Thevenot, Reckard dug deeper, and what he found was “the scope was really big” and not just limited to Southern California.
On Dec. 23, 2013, the Times published a much more comprehensive story, which Reckard began with an anecdote from a former Florida branch manager. Reckard quoted the former manager, Rita Murillo, as saying: “If we did not make the sales quotas…we had to stay for what felt like after-school detention, or report to a call session on Saturdays.”
From there, the Consumer Financial Protection Bureau and state regulators got involved, and early this month the story exploded when the CFPB announced the $185 million settlement.
A Sept. 8 New York Times story quoted CFPB director Richard Cordray as saying, “Unchecked incentives can lead to serious consumer harm, and that is what happened here.”
I’m not taking anything away from the CFPB. I’m glad its investigators got in there and cracked open the pineapple. But there wouldn’t have been any pineapple if it hadn’t been for Scott Reckard and the Los Angeles Times.
**
As I mentioned, Reckard retired last year, after 18 years with the Times and 14 before that with the Associated Press. He told the CJR he retired “because it wasn’t as much fun…working for newspapers these days.”
Almost any veteran newspaper reporter would say the same thing. Yet the work remains as important as ever, and let’s hope many in the new generation of reporters are as dedicated, resourceful and enthusiastic as Reckard. The dividends can be great, not just for the individual but, as the Wells Fargo story clearly demonstrated, for the public at large.
Reckard acknowledged the personal and professional satisfaction when he told the CJR:
“It’d be easy to look back and say, ‘Why the hell did I spend my life doing something?’ But when you get a chance to actually see that there was some action that resulted on something important you covered, it sort of restores your faith in the whole process.”
I have followed this story for a couple of different reasons…but without finding so far, the information I was seeking.
I can understand compensating a sales associate for getting a customer to sign-up for a credit card … that’s obviously based on the future value of the customer and his/her use of the card — but no money has changed hands.
Were there other types of accounts set-up? And if so, how would they be considered accounts if no money was involved in the transactions?
How much real money was involved in the non-credit card accounts that were set-up? What was the total monetary damage to the customers involved?
And finally, where does the $185 million dollar fine go? To whom and how is it paid? What is it used for? Does it pay any bonuses to the CFPB execs instrumental in its capture?
So I guess John Stumpf knows what it feels like to be a fish in a barrel now. Maybe he should have made a contribution to the Clinton Foundation’s mea culpa fund to ward off Senator Warren’s onslaught.
I will try to answer…
— The managers wanted any types of accounts opened, checking, savings whatever, as I understand it. I think they didn’t know that many employees were opening accounts and then quickly closing them, maybe by moving nominal amounts into the new accounts and then out as they closed them. The employees apparently were able to get managers off their backs (and meet quotas) simply by opening new accounts. I know it doesn’t make a lot of sense because there was so much churn, but the name of the game was opening accounts, issuing credit cards and selling other bank products. Sell, sell, sell!
— According to a Bloomberg story, $100 million goes to the CFPB, $35 million to the Office of the Comptroller of the Currency and $50 million to the Los Angeles city attorney.
— Wells Fargo also agreed to compensate customers who incurred fees or charges, and it has set aside $5 million for “customer remediation.”
So, Wells Fargo will pay a fine of 185million. Which leads to my burning question: What happens to the fine money? Who gets it? Where does it go? Who benefits from the imposed fine?
Peg — See answer above.
If memory serves, one of the huge fines levied against another corporation wound up being given to the city of Detroit by the Obama administration.
That said, there is nothing worth more to the citizens of this country than solid acts of journalism that simply lay out the facts and let the people decide what to do with them.
Stuff like this is absolutely fascinating and opportunities abound to do stories like this and instead reporters lay around regurgitating press releases (and getting punked by the likes of Melissa Rooker), or manufacture news stories that fit their ideological view of the world (like the moron at the Cap-Journal who reported on 8 people protesting Chamber endorsements that hadn’t even been made yet).
PS your photo spells the reporter’s name differently than the article.
Spellings reconciled…Thanks, John.
…I doubt the name Melissa Rooker means anything to the vast majority of our readers, but, please, don’t feel obliged to go into detail! (Just an advisory.)
If Mr. Altevogt doesn’t wish to expound there’s always Google!
You underestimate your readers. This is a very knowledgeable crowd, so I’m good that they, like you, know what I’m talking about and will leave it at that.
Not a story you will find in the Shawnee Mission Post. The C of C would not approve.
Gayle — Google won’t help; this is strictly hip-pocket stuff.
Apparently I’m not in the “hip pocket,” ’cause I have no idea what he’s talking about, but that’s ok.