The bad news keeps on coming for Wells Fargo and its embattled CEO, John Stumpf, and the once most valuable bank in the world now confronts another scandal.
The U.S. Department of Justice could fine the company millions for the improper repossession of automobiles owned by members of the U.S. military, a Bloomberg investigation revealed on Thursday. The news comes a year after the bank settled a legal case for millions of dollars after it was accused of foreclosing on homes of military families without going through the procedures required by U.S. military law.
Such actions run afoul of the U.S. Servicemembers Civil Relief Act (SCRA), which offers several legal and financial protections for members of the U.S. military who are called to active duty.
Wells Fargo’s alleged aggressive treatment toward its military customers comes at a time when the company is already reeling over its $185 million settlement with the U.S. Consumer Financial Protection Bureau (CFPB). The CFPB imposed the penalty after investigations revealed thousands of bank and credit card accounts were opened for Wells Fargo customers illegally and without their knowledge. Wells Fargo fired over 5,000 employees in recent years. Now, some are filing class-action lawsuits saying they lost their jobs while Stumpf and other Wells Fargo executives benefited handsomely due to the company’s robust stock performance.
One would think that after two long, expensive and devastating wars that imposed a huge burden on military members who served abroad – as well as adding to what their families endured while they were deployed in Afghanistan and Iraq – a company with the gravitas of Wells Fargo would have cut these families a break. After all, companies accused of mistreating military members often find themselves in the middle of public relations nightmares and long-term harm to their reputation.
U.S. air carriers such as Delta and American Airlines were exposed to public scorn after it was revealed they offered no flexibility on their baggage fees to service members. And outrage over homeowner associations (HOAs) foreclosing on military members while they were deployed overseas led the Texas legislature to pass bills that put the brakes on how fast HOAs could take a home’s title away from military families.
As the Bloomberg report revealed, banks’ response to the problem with asset repossessions is that employees often do not understand the legalities that are involved when a military family falls behind on housing or car payments. Nevertheless, Wells Fargo’s latest mishap reveals executive leadership that was tone-deaf and quick to pass the buck when the actions of its employees landed the company in legal trouble. The bank has branches on eight U.S. military bases, though its genuine commitment of “making banking easier” for military service members will long be in doubt.
Watch for Wells Fargo to struggle as consumer backlash forces large institutions to re-evaluate their relationship with the San Francisco-based banking giant. California’s Treasurer, John Chiang, recently sent a letter to the company asking, “How can I continue to entrust the public’s money to an organization which has shown such little disregard for the legions of Californians who have placed their financial well-being in its care?”
California began to sever its relationship with Wells Fargo, starting with the cessation of purchasing any more of the bank’s debt securities, an end to using Wells Fargo as a broker-dealer. It will also no longer engage the company when it underwrites bonds, a National Public Radio report revealed.
Meanwhile, Stumpf was subjected to more grilling by the U.S. House Financial Services Committee, with members of Congress unleashing on him for what they called violations of the public’s trust. As far back as Stumpf’s “clawback,” which could cause him to lose as much as $41 million in compensation, Rep. Maxine Waters, (D-Calif.) retorted, “Let me be clear, it’s not enough.”
And the humiliation was bipartisan in tone, as Rep. Roger Williams (R-Texas), a Wells Fargo customer, bellowed: “I’m amazed at what you don’t know about your business. I’ve heard more ‘I don’t knows’ from a CEO than I think I ever heard in my life. When are you going to resign?”
Watch for this scenario to repeat itself again, if Wells Fargo’s military foibles are even larger than originally suggested by Bloomberg.
Image credit: Screen Capture from House Financial Services Committee/YouTube