Wells Fargo Scam Puts Other U.S. Banks in the Crosshairs

By Financials FOXBusiness

Richard Cordray, Director of the Consumer Financial Protection Bureau, tells FOX Business his agency is investigating potentially illegal activity at other banks similar to the scam perpetrated against unsuspecting customers at Wells Fargo (WFC). 

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“We’ve put the entire banking industry on notice that this kind of conduct is completely inconsistent with what it means to be a bank" he said. 

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Wells Fargo agreed to pay a $100 million fine and $85 million in penalties and restitution after it was revealed thousands of Wells Fargo employees were part of a “widespread illegal practice of secretly opening unauthorized deposit and credit card accounts” in order to meet sales goals and compensation incentives. In some cases, those fraudulent accounts earned the bank fees which it has agreed to refund to customers. 

Wells Fargo announced on Monday that it would eliminate the sales goals and product cross-selling as a result of the investigation.  FOX Business reached out to other banks to see if they had similar programs. JPMorgan Chase (JPM) and Bank of America (BAC) declined to comment. Citi (C) did not respond to a request for comment at the time of publication.

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The Wall Street Journal reports federal prosecutors in New York and California have subpoenaed documents from Wells Fargo as part of an investigation into potential criminal activity at the bank.  Cordray says his agency will cooperate with federal investigators. 

Wells Fargo knew in 2011 there was a problem and says it began firing employees five years ago, 5,300 to date, for violating bank policy.  But Wells Fargo has refused to comment on what steps it may have taken to stop the illegal activity. 

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Cordray says investigations will continue, potentially reaching high up the chain of managers.  When asked if the investigations could reach Wells Fargo CEO John Stumpf’s office, Cordray would not speculate but said, “Some of that is still being determined but I think it has been acknowledged by the bank that the firing of the employees included 100s of people who are not front line employees with accounts but people who were managing these people and people who were managing the managers.  That goes up the chain a good ways.” 

Wells Fargo declined to comment. Stumpf will appear before the Senate Banking Committee on September 20th in a hearing on the scandal.

Shares of Wells Fargo have lost nearly 10% this month.

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