Velazquez, House Members Call for Investigation into Wells Fargo Small Business Lending
Washington, DC – Rep. Nydia M. Velázquez (D-NY) led seventeen of her House colleagues in calling on regulatory agencies to investigate whether Wells Fargo’s unethical cross-selling practices and illegal opening of secret accounts extended to its small business lending division. As the Ranking Democrat of the House Small Business Committee and a senior Member of the Financial Services Committee, Velázquez previously questioned Wells Fargo’s CEO about the topic at a Congressional hearing.
The text of the letter, which was signed by members of the Financial Services and Small Business Committees, is below:
The Honorable Maria Contreras-Sweet
Small Business Administration
409 3rd Street SW, 2nd Floor
Washington, DC 20024
The Honorable Richard Cordray
Consumer Financial Protection Bureau
1700 G Street, NW
Washington, DC 20552
The Honorable Thomas J. Curry
Comptroller of the Currency
Office of the Comptroller of the Currency
400 7th Street, SW
Washington, D.C. 20219
Dear Administrator Contreras-Sweet, Director Cordray, and Comptroller Curry:
We write to urge the Small Business Administration (“SBA”), the Consumer Financial Protection Bureau (“CFPB”), and the Office of the Comptroller of the Currency (“OCC”) to open investigations into potentially illegal actions stemming from incentive-based compensation practices at Wells Fargo in its SBA 7(a) and broader small business lending division.
On September 8, 2016, the CFPB, OCC, and Los Angeles City Attorney announced settlements and fines totaling $185 million against Wells Fargo for secretly opening unauthorized deposit and credit card accounts. For years, employees were pressured by sales targets and compensation incentives that resulted in the creation of an estimated two million secret customer accounts. More shockingly, employees transferred customer funds to these accounts without their knowledge and ultimately racked up $2.6 million in unwarranted charges and fees.
During the investigation and subsequent Congressional hearings in the Senate and the House of Representatives, John Stumpf, CEO and Chairman of Wells Fargo, testified that he did not become aware of the growth of the unauthorized customer account openings until late 2013. However, there is evidence these practices started much earlier. While over 5,300 employees have been fired for unethical conduct related to opening unauthorized accounts since 2011, to our knowledge no senior executives at Wells Fargo have been terminated as a result of the practice or the recent investigation and fines. The failure to hold senior executives accountable is inexcusable and leads us to believe this was a company-wide culture of deception, not the acts of rogue employees in the community banking division as Wells Fargo asserts.
All the more troubling is the fact that Mr. Stumpf could not assure the House Financial Services Committee that these illegal practices did not impact Wells Fargo small business customers. On September 29, 2016, during questioning, Representative Nydia M. Velázquez, the Ranking Democrat on the House Small Business Committee, asked Mr. Stumpf, “Can you provide us today with assurances that these illegal practices did not affect any of your small business clients at Wells Fargo?”
Mr. Stumpf was unable to answer this question, even after being asked a similar question one week prior during his appearance before the Senate Committee on Banking, Housing, and Urban Development. This lack of assurance from Mr. Stumpf is very troubling and leads us to believe additional federal investigations are necessary and warranted.
We fear that if unauthorized accounts were being opened by employees under pressure to meet incentive goals, it would have devastating effects on small business customers. As we all know, access to capital is the lifeblood of every business and continues to be a struggle for millions of small businesses across the country. The negative impact on a credit report resulting from secret, unauthorized accounts could be the difference between getting a loan and thriving or being denied and going out of business.
For these reasons we respectfully request you open an investigation, either separately or jointly, to examine: (1) if Wells Fargo had similar cross-selling promotional incentives for employees that served small business clients, and (2) whether Wells Fargo employees perpetrated similar frauds, including, but not limited to, the opening of unauthorized accounts, against small business clients.
The possibility that Wells Fargo may have perpetrated similar actions would have real-world impacts on the livelihood of hard-working small business owners and their employees. We urge you to quickly act to protect our nation’s small businesses and jobs.
Nydia M. Velázquez
Donald Payne, Jr.
Michael E. Capuano
Wm. Lacy Clay
Stephen F. Lynch
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