Consumer outrage over Wells Fargo & Co's WFC business practices appears to be reaching critical mass.
On August 31, just hours after Wells Fargo revealed that employees had created at least another 1.4 million unauthorized consumer accounts, a coalition of 33 consumer groups fired off a letter to two congressional banking committees charging the bank may have lied to Congress last year about its fraudulent auto insurance sales.
The coalition, led by Public Citizen & Americans for Financial Reform, suggest top-ranking executives at Wells Fargo may have misled lawmakers during an active investigation last year. During congressional hearings held in September 2016, the executives “may have knowingly and deliberately withheld information” about the bank’s fraudulent auto insurance sales practice, according to the coalition.
The auto loan scandal, broken by the New York Times earlier this month, revealed an internal Wells Fargo report that showed the bank had charged more than 800,000 people for auto insurance they did not need, leading 274,000 customers to become delinquent on their car loans and nearly 25,000 to have their vehicles repossessed. Some of them had their credit damaged, including enlisted military personnel who stand to lose security clearances as a result of damaged credit scores.
The consumer coalition reports that the bank’s own timeline showed it was aware of the 800,000 customers sold unnecessary insurance in July 2016, several months before when the executives testified before the two banking committees in Congress. “Yet Stumpf’s testimony made no mention of this misconduct, even when he was asked directly whether fraudulent activity might exist in other business lines,” the coalition pointed out.
The bank later repeated this denial in written responses to questions from member of Congress, the coalition noted.
“Wells Fargo had several opportunities to disclose its fraudulent insurance practices to Congress (last year) and chose not to – including in response to direct questions by Members on the two separate occasions,” the letter to the committee states.
Withholding relevant information from a congressional inquiry is a criminal offense, punishable by up to five years in prison, according to the letter. The coalition has called on the two committees to hold further hearings to investigate Wells Fargo’s newly disclosed abuses and whether the bank lied to Congress.
“Wells Fargo has long forced defrauded consumers into arbitration to hide its misconduct from public view, but lying to Congress would cross a new line,” said Amanda Werner, arbitration campaign manager for Public Citizen & Americans for Financial Reform, one of the signatories to the letter petitioning Congress for a hearing against the bank. “Having just admitted to nearly twice as many fake accounts as previously reported, Wells Fargo has a lot to answer for.”
The coalition also reports the bank recently settled federal claims alleging Wells Fargo overcharged veterans and is facing allegations that it overcharged small businesses for credit card processing “in an overbilling scheme that targeted ‘less sophisticated’ mom-and-pop shops.”
Meanwhile, plaintiffs in a class action suit are waiting on a federal appeals court in Atlanta to rule on the bank’s effort to arbitrate allegedly deceptive overdraft fees on a customer-by-customer basis. (According to research from the Economic Policy Institute, in arbitration consumers win only 9% of the time.) If Wells Fargo loses its appeal it could face payouts up to $1 billion for those aggrieved customers.
“Wells Fargo used forced arbitration clauses and class-action bans to hide abuses and prevent its customers from securing justice,” said Lisa Donner, executive director of Americans for Financial Reform, in a public statement. “It now appears that they have also tried to hide the breadth of problems inside the bank, even in the face of direct questions from members of Congress.”
U.S. Sen. Elizabeth Warren has said members of the Wells Fargo board serving at the time of the multiple scandals should resign, and frustrated consumer advocates are calling for accountability. One said banking committee chair Sen. Mike Crapo (R-Idaho) and financial services chair Rep. Jeb Hensarling ( R-Texas) have a duty to investigate.
“GOP Senator Crapo and Rep. Hensarling have to decide whether to further expose Wells Fargo's illegal practices and deception of Congress, or cover them up,” said Rosemary Shahan of Consumers for Auto Reliability and Safety, one of the signatories to the consumer coalition letter. “If they fail to hold Wells Fargo accountable, that will send a signal to all banking institutions that it's open season on American consumers.”
A Wells Fargo spokeswoman told Benzinga that bank officials testified truthfully before Congress last year.
“We stand by the accuracy of statements previously made to Congress in the context of its examination of unauthorized account-related sales practices in our community bank,” Wells Fargo spokeswoman Jennifer Dunn said. “We continue to review operations across all business lines for unrelated issues that may have resulted in customer harm, such as Collateral Protection Insurance, and to make things right for those customers. We are committed to further improving our operations and to transparency with all stakeholders on these matters.”
The bank has also released a prepared statement saying that it is taking significant steps to compensate its retail and small business customers “who have been harmed or impacted by unacceptable retail sales practices within the company’s retail bank.”
Those steps, the bank said, include processing claims on one $142 million class action suit already settled, as well as correcting credit scores with the major credit reporting bureaus for customers who had bank accounts opened without their authorization.
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