A rebellion is brewing to rein in predatory account management practices in the U.S. banking industry.
And consider this: In southern California, Wells Fargo bank branches instructed their employees to “round up” Hispanic immigrants, many of them undocumented, who were employed at nearby construction sites or congregating on street corners as day-laborers. The bank offered them customer accounts regardless of their legal status, and then applied the cross-selling policy to rope in their families and relatives.
The bank pursued the same policy toward Native American customers on the assumption that they would be less likely to complain.
As if these policies weren’t bad enough, the bank is continuing to resist good faith legal settlements. It has refused to settle several outstanding whistle-blower lawsuits for wrongful termination, even though the US Justice Department has recently weighed in with briefs to support the fired workers.
And despite promises to do otherwise, the bank is challenging class-action lawsuits from share holders that want compensation for the damage the bank did to its holdings and to the bank’s reputation by issuing misleading public filings that denied that illegal cross-selling was occurring.
Wells Fargo insists that these cases be settled in arbitration, limiting its admission of liability as well as the size of the awards.
At last April’s shareholders meeting, there was a mini-uprising among attendees that almost led to a fist fight when one angry shareholder physically charged a board member, and was removed. Several top board members, including the chairman, Stephen Sanger, barely survived a vote of confidence. Now there are rumors that the entire Wells Fargo board – all 12 officers — could soon be voted out.
That would be the clearest sign yet that Wells Fargo understands the consequences of violating the public trust — and after two decades of gross malfeasance, is prepared to reinvent itself.
But it may not happen in the current political climate. House Republicans want to strip the Consumer Financial Protection Bureau (CFPB), created in the aftermath of the 2008 stock market crash, of its investigative power which would make discovery of future banking improprieties less, not more likely.
A GOP bill sponsored by Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, that would all but eliminate the CFPB is likely to pass when the full House votes on the measure early next year. Only a Herculean effort by Warren and other Senate Democrats is likely to leave a truncated CFPB in tact.
But does the threat of tougher regulation even matter? A recent investigative report found that many Wells Fargo branches are continuing to pursue the same aggressive approach to sales that got the bank in trouble to begin with. And other banks, like J.P. Morgan, while denying that cross-selling abuses are “systemic,” admit that they pursue the same general policy that Wells Fargo does.
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In other words, the underlying conundrum — banks preying on the very customers they are pledged to serve, in a never ending search for profits — could well remain, whether or not Wells Fargo — the industry’s new poster boy for malfeasance — survives.