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Federal Investigator Outlines Probe Into Wells Fargo


How can more than 5,000 bank employees secretly and illegally open accounts and credit cards in customers' names without any of their top bosses noticing? Last week, regulators announced more than $180 million in fines and penalties for Wells Fargo. That's because at least 5,000 employees were supposedly opening accounts due to intense sales goals. Executives at Wells Fargo have deflected blame for what went wrong. We're going to dig into some of the questions surrounding the case with Jeff Ehrlich. He's the deputy enforcement director at the Consumer Financial Protection Bureau, and he worked on the federal investigation. Welcome to the program.

JEFF EHRLICH: Thank you, Audie.

CORNISH: Lay out for this case why you think so many employees ended up opening these fraudulent accounts.

EHRLICH: Right, so what we found were that roughly 5,300 employees engaged in the same sort of unlawful practice, which was to open accounts for existing customers. The employees were acting in response to two - two things were happening. One, there were sales targets that they were required to meet. And if employees didn't meet sales targets, they might be subject to discipline from their employer.

And then, second, the bank had an incentive compensation program by which employees could earn additional credit toward compensation if they were able to sell new products and services to existing consumers. And the result was that some of them, those 5,300, engaged in unlawful conduct to meet those goals and to earn the additional compensation.

CORNISH: We reached out to a former employee who spoke to us. Her name's Becky Grimes. She's been in banking for, like, 30 years. She said she spent half that time at Wells Fargo. And she said she left the company because she was constantly being threatened by her district manager if she didn't hit these aggressive sales goals. And she says, oh, sure, Wells Fargo had a written policy on sales integrity, but there is always a gray area in ways to make those goals, which included intimidation and harassing the customer. Why does the CFPB believe that this behavior did not stem from a directive from the top or at least higher up in the company hierarchy?

EHRLICH: You know, we didn't make findings that there were directives to employees to do anything illegal. But when you find, on a large scale, that, you know, in this case, 5,300 employees are engaging in the same type of unlawful conduct, that's a pretty good sign that there's something gone wrong at this bank. And that's why we brought the enforcement action.

CORNISH: So what do you mean when you say no finding? Does that mean that you, as regulators, are unsure, or that you had no evidence? What does no finding mean?

EHRLICH: We make findings through a formal process that results in a consent order. The consent order contains a lot of facts. We want to lay out for folks what we think happened. But we're very careful to include only facts that we found in the course of our investigation to be reliable and that we could conclude actually happened. So these are the bureau's facts, and we generally don't talk about what we might have learned in other aspects of our investigation.

CORNISH: Now, there is a feeling, especially since 2008 and the financial crisis, that the top people at banks don't always get punished for what goes on lower down. People feel the same way looking at this. And do you, as a regulator, wish that you had more power?

EHRLICH: Our role here is to make things right by consumers, to make markets safer for consumers. If something is happening and consumers are being hurt, we want to stop it. And to the extent that folks have been hurt, we want to get them their money back. As to whether people should be punished, the bureau is not vested with any criminal authority. We can't prosecute people. We can't put people in jail.

There are other folks who do that. And, you know, it's up to them. If they review this conduct and determine that something warrants attention of criminal prosecutors, that's their business. But that's not what the bureau is doing. We're - we're here to make markets safer for consumers, to identify situations where consumers have been harmed and to make it right to get folks their money back.

CORNISH: Jeff Ehrlich - he's the deputy enforcement director at the Consumer Financial Protection Bureau. Thank you for coming in.

EHRLICH: Thank you, Audie.

CORNISH: And this week, Wells Fargo announced it would eliminate product sales goals in their retail banking business. In a statement, CEO John Stumpf said that, in the past several years, the bank has, quote, "significantly strengthened our training programs, controls and oversight." Meanwhile, according to Reuters, a proposed class-action lawsuit against Wells Fargo was filed today in federal court. Transcript provided by NPR, Copyright NPR.