Public Service Americas cabletelevision companies and is brought to you today by her cable or satellite provider. The ceo of wells Fargo Timothy sloan testified before the Senate BankingCommittee Last week about changes at the bank since it was revealed that wells fargo had opened an authorized account for some customers. Idaho center mike crapo chaired this twohour hearing. This hearing will come to order. Before begin today let me acknowledge that our nation is to morning and remember the lives lost in las vegas. Our condolences go out to the families affected by this in this crime, at our thanks go to the courageous First Responders and police and citizens who put their lives on the line to save others. Two members of this committee bothon of the senators of nevada are absent today because theyre in nevada. And i know senator heller and center court as master are currently doing all they can. We will remain united in prayer and support with them during this difficult time. Today were going to her testimony from wells fargo chief executive officer and president tim sloan. Welcome, mr. Sloan. Just over a year ago, former wells fargo chairman and chief executive officer john stumpf testified in front of this committee on the banks fakeaccount scandal and his handling of its fallout. Of the many issues emphasized by Committee Members during that hearing was the need to hold executives accountable and to ensure that customers impacted would be made whole. Mr. Stumpf repeatedly committedt that the bank would take necessary actions to make it right, and to restore the publics and Investors Trust in the company. Incidents like these remind us of how critically important it is for companies to Institute Policies and procedures that foster customer protection, promptly identify and address problems, and treat customers fairly. Since that hearing, wells fargo has made changes to its corporate and managerial structure in an effort to address the concerns raised by this incident. However, new developments and disclosures at the bank during the last year merit new scrutiny. C on august 31, 2017, wells fargo announced the results of an expanded review of Retail Banking accounts, which including accounts opened between january 2009 and september 2016. The expanded review found the number of potentially unauthorized accounts numbered 3. 5 million instead of 2. 1 million. Separately, the companyze discovered problems with respect to its auto collateral protection insurance, or cpi, business and selfreported these issues to its regulators. In response to customer complaints, wells fargo reviewed policies purchased on behalf of customers between 2012 and 2017, and found that up to 800,000ch customers may have been harmed by wells fargos cpi practices. The end result was that customers were charged for Car Insurance that they did not need and some had their vehicles wrongfully repossessed. For families, having your car repossessed or credit compromised is devastating. These new developments raise a number of questions that wells fargo must answer including, what has wells fargo done to ensure that customers affecteda by any of these issues are or will be made whole . In more complex cases where customers Credit Scores were negatively affected, how is wells fargo working with other parties to restore those Credit Scores and return amounts in those instances where customers experienced higher borrowingrk costs . What structural and cultural changes has wells fargo made in the last year to address both past issues and new revelations, and what evidence is there that new policies and procedures are effective . Finally, as members asked last year, what has been the involvement of regulators since the initial incident, and in response to the new disclosures . We welcome your comments on these matters. Before we get to the testimony, senator brown. Thank you, mr. Chairman. I could your comments about the citizens of laso vegas echo and the many visitors who also lost the lives or were injured in that terrible shooting. Our hearts go out to all of them and their families. Special concert also do senator howlett and senator cortez masto on this committee. I hope after every tragedy we always see our hearts and minds go out to the victims and their families. I hope the United States will actually do something about this for a change. A year ago then wells fargo coo john stumpf sat in this hearing room attempting to explain the inexplicable, the banks punitive sales goals had pressured its employees and opening over 2 millionl fraudulent checking and credit card accounts. In written a followup questions for the record, Committee Democrats asked mr. Stumpf if he is confident this type of fraudulent activity existed in no of the part of wells fargo. We asked about a right of products including insurance. On november 15, 2016, wells fargo responded quote we believe the activity at issue here was limited to Certain Team Members within the Community Bank division. Weve learned over the past year the problems are much larger, more systemic than the bank originally disclosed. Before being forced to come clean by a multiagency investigation, wells fargo went to Great Lengths to barry, to bury the scandal. It subjected customers to force arbitration, prevented them from their day in court. Further, concealing the front. Employees who tried to alert Senior Management to the treatment of wells fargo customers were silenced or fired. 2013, a california customer sued claiming wells had open several unauthorized accounts in his name. Wells fargo forced, forced that case out of the courts and into nonpublic arbitration claiming that the terms of the real account should govern the fake ones. Think about that. Using forced arbitration. Wells forced that case out of the courts f and the two nonpubc arbitration claiming that the terms of the real account should govern the fake ones. In 2015 another customer in california filed a class action against wells for the same practices, and the bank again used its fine print legalese to fight to keep the case under seal. Again using forced arbitration. Has the Company Changed . Just two months ago wells used its forced arbitration clause again to argue that it should not have to pay customers it cheated on overdraft fees. In august of this you wells finally disclosed a number fraudulent account was at least 3. 5 million. 70 higher than it originally reported. The bank revealed that stuck agent does customers with Auto Insurance policies, as chairman crapo said, without telling them a check to see if they already had insurance. The bank was aware of these problems in its auto Loan Division inn july 2016. Yet, well ceo told this committee that fraudulent sales practices were limited to the Community Bank. Mind you this is not a casual response tot a question that caught somebody off guard at a hearing. It was a written response that was undoubtedly approved by lawyers and others at the bank, maybe even you, mr. Sloan, were among those who saw the response for it was sent to congress. A ta week after last years heag the board of directors initiated its independent review of the Company Sales practices. The report to the board whose members i might add are paid an average of 370,000 for a parttime job, 370,000 to prepare for and attend several meetings a year found that the fault lay elsewhere. Thats cold comfort to the thousands of employees who make perhaps onetenth of what these Board Members make, who were fired for failing to generate enough new accounts. The board chose to limit the scope of the review to the Community Bank, which is troubling. It shouldve know or should i wanted to know that additional problems existed in other divisions. The changes thatem mr. Sloan and his teammate are not sufficientn reform a Corporate Culture that is willing to abuse itsfi customers and its employees in an effort to pad its numbers in an effort to increase executive compensation. In light of the millions of americans defrauded by wells fargo, the recent Equifax Breach the compromise 145 million americans personal financialal information and the spc breach the alleged insider trading, its no wonder the public doesnt trust our financial system. We need strong rules to guard against abuses and forced arbitration in payday lending and that collection and Mortgage Servicing and credit reporting accuracy. Rather than working to roll back Consumer Protections that this committee seems to want to do, we should be supporting the Consumer Financial protection bureau. We should be supporting otherte financial watchdogs that stand up for hardworking americans when Big Companies take advantage of them. Thank you, mr. Chairman. Thank you, senator brown. We will now proceed to testimony from mr. Timothy sloan, the chief executive officerth and president of wells fargo andna company. Mr. Sloan, your written statement will be made a part of the record in its entirety and you may proceed with your oral remarks. Chairman crapo, Ranking Membered brown, and members of e committee. My name is tim sloan and on the coo of wells fargo. I want to thank you for the invitation to this hearing on wells fargo wells fargo one year later. This was a year of disappointment and transition at wells fargo. When my predecessor testified last year we had not fully grappled with the damage, the sales practices scandal w had de to our customers, our team members, and theirac trust in or bank. We recognized too late the full scope and seriousness of the problems in our Community Bank. We did not come to congress with a good plan, and we deserved your criticism. But i heard you, and i heard our customers and our team members. I heard themd loud and clear. You expect us to do better, and so do we. So let me be very clear. I am deeply sorry for letting down our customers and our team members. I apologize for the damage done to all the people who work and bank at this important american institution. When the challenges ath wells fargo demanded decisive action, we acted to slowly and to incrementally. That was unacceptable. I also want to be clear about another thing. Wells fargo is a better bank today than it was a year ago, and next year wells fargo would be a better bank than it is today. That is because we spent the past year determined to earn back the publics trust. Since i became coo 11 months ago, my team and i have been focused on three tasks we are here to discuss today. First, in response to the sales practices problems announced in 2006, we are transforming our Community Bank. Our retail bank as a strong new leader, oversight, compliance and Human Resources are much more effective than a year ago, and a far greater visibility and accountability across thefe ente company. We have revamped the incentives for our Retail Team Members by eliminating Product Sales goals. Today, wells fargo rewards teamwork and excellent Customer Service, not just selling products. Our Community Bank is aor fundamentally Different Organization from the one that existed in 2016. Second, we are reviewing operations and. Increasing accountability across the entire company. Now when a concern emerges we it quickly. We escalate it probably. We disclose it appropriately, and we address it fully. We willwa demand individual executive accountability. We have clawback 180 million in Senior Executive compensation, and we have fired senior retail, mortgage, and auto lending executives for not performing up to the standards our customers deserve. Third, we are compensating every customer who has suffered because wells fargo made mistakes. Last year we reviewed 93 million opened accounts, open between 20112015. This year we went back and took and even closer look at 165 million accountsl open between 20092016. Just as we expected we found more accounts that should not have been opened. This was not new potential misconduct since last year. It all happened before 2017, but it is a very serious issue all the same, ande we are completely committed to fixing it. Of the 3. 5 million potentially unauthorized accounts, about 190,000 incurred 6 million in fees and charges. Wells fargo is refunding every nickel, and we are paying 142 million to compensate all affected customers, including for increased borrowing costs from credit score impacts. Apart from these formal reimbursement mechanisms, i want to be very clear that wells fargo is committed to addressing any concern that any of our customers may have about an unwanted product or service, o matter where or when it may have occurred. If there is a problem, we want to hear about it. This past year has been humbling and challenging. My newborn job as ceo is to make sure that nothing like this happens again at wells fargo. Fortunately, joining me in this big task are 270,000 outstanding Wells Fargo Team members. Im proud of their hard work and want to thank them for their commitment to making things right. I see improvement every day, and so do our team members. I think our customers have noticed the improvement, too. I pledge to you that we will not stop until we restore our Customers Trust and make wells fargo the finest and most Ethical Company it can be. Thank you again for the opportunity to address the committee. I look forward to yourn questio questions. Thank you, mr. Sloan. In our hearing last year members of this committee asked many questions about how customers and consumers whose Credit Scores were impacted would be made whole. In cases where customers Credit Scores were negatively affected, how is wells fargo would with other parties to restore those Credit Scores at in case of a customers experienced higher borrowing costs, reimbursing those costs . Chairman crapo, were doing that in a few ways. First and foremost we went to the Credit Bureaus and provided the names of our customers whose account couldve been inappropriately opened. Unfortunately, because of regulation that Credit Bureaus couldnt provide us with the details of those customers back to us. What we saw when we look at that is about 40 of those customers had no use of the trade lines within a year. So that credit was not impacted. Of that remaining 60 , about 25 had no impact on their Credit Scores. We found that the median impact, excuse me, i mean impact was about four points. But numbers are just numbers because certainly more customers were impacted and some couldve been impacted, Credit Scores, by more than four points. What we did was we reached out to 43. 5 million Small Business and consumers and said, if you have an issue, come into wells fargo and see us and we will make it right. Approximately 41,000 customers have come in. Based upon that, about half bd credit related issues and we have made it right for those customers. In addition as part of the 142 million settlement that i mentioned, the lions share of those funds are going to go to customers whose credit score have been impacted so we will be working with the experts that, the attorneys for the class have provided. Were going to provide them with whatever information they want. We are reaching out to those 439 customers again as well as tens of millions of former customers to make sure that they know about the Class Action Settlement so that they can be made whole as part of that settlement for any credit impacts. Some of the actions required by regulars as as a part of yor september 2016 settlements include the establishment of a compliance committee. Carrying out an enterprisewide risk review of sales practice risks, andng maintaining enterprisewide sales practice Risk Management and oversight. What has been the involvement of regulators since initial incident, including in response to the new disclosures about the increased amount of unauthorized accounts as well as the cbi issues . We have an active dialogue with our regulators, the Federal Reserve, the occ and the cfpb wing were talking about bank related issues. So the to two minutes dialogue. For example, as it relates to the collateral protection or cpi issue, when that got escalated in the third quarter, we reported it to our regulators on a realtime basis and weve been working with them not only to keep them apprised of those issues but also in particular with the occ working with them to make sure that the remediation plan we had for any customer that was impacted by cpi is acceptable. As a relates to the fundamental changes that have been madel since i became coo, our compliance, we have done following things. First and foremost we centralized all of our enterprise risk and control activities. That was one of the feelings, the report from the independent board of directors that and we agree with that. Those seven centralized. We are hiring a new compliance officer. We have completed and devised a new compliance plan. We have created a conduct office in thehe centralized risk group that independently brings up and complaints, ethic lines issue, insert team ever turn up so we can connect the dots better than we didb a year ago. Senator brown. Thank you, mr. Chairman i dont think we have a good answer yet, mr. Sloan, as to how and why this activity went on for so long in your bank. The Company First blamed rogue employees. D were trying to meet unrealistic sales goals then blamed the Senior ExecutiveVice President for s committee banking who eard 9 billion dollars in 2015 and finally johnstone, the chairman and ceo or 19 million that year. Youve been at wells fargo for a long time, 30 years event ceo, cfo, she demonstrated officer, had it also bank which includes overseeing insureds. Was there no point prior to 2015 with the lawsuits and the terminations and the whistleblowers, was there no point that you saw problem in the bank that required action . Senator, thats not, its incorrect. In fact, ive been very public and have made this date on number of occasions and also it was fun of the boards report that in 2013 when the sales practices issues were elevated to the operating committee, i sat on the operating committee, actually correct, in my role at the time as cfo, that it was elevated to that group. We took action but in hindsight we took action that was insufficient, as i sit in my opening a statement. Im i angry about how we handled the problems historically. Im disappointed in how we have done, how we handled those. But the fundamental change that have been made since ive been coo have been addressing the failings of the board report pointed out, are regulars pointed out, and the mistakes i saw in my prior roles. Thats an answer, but as the cfo, is longtime employee of the company as having a strong, i understand close relationship with mr. Stumpf, it still perplexes me why your anger now were speaking out about it four years ago couldnt have had more impact on the return to another issue. W youve testified about how wells has changed but i think action speaks louder thanes words. For your bacon bank, you use fe arbitration type cases customers alleged fake accounts have an open internet. I mentioned in my Opening Statement the 2013 lawsuit, the 2015 lawsuit that wells was able to squelch because of the force arbitration clause. Not only did use force arbitration to keep the fraud hidden, thats what it did, bt your banks also taken the position that the fine print on a real account should apply toward fraudulent one. So you settled with some customers on that issue. Your bank was still making that argument as recently as last month against customers in utah. To top it off in august you asked a court too toss out a class action on a completely different scandal that also goes back several years. Again a based on the force arbitration clause, the arbitration clause you force your customers to sign. Many of their competitors are starting to eliminate or have eliminated the practice of stop the practice of force arbitration. Would you commit to the committee today that wells fargo will quit using forced arbitration . No, i wont get when i hear the word arbitration, what i hear is the word failing. When we have to resort and have to have the conversation about come with our customers about arbitration it means that we dont have thet right product here we have provided in the right way. We have responded to the complaint and we have made it right to the. Let me describe what we do to change that. First and foremost were doing aa thorough review of all of our products and services to make sure that they are the right products and services for our customers. In some situations we stop providing certaing products because we didnt believe we could provide them in the appropriate way. Second, we aree improving how we train our people and our team members to sell our products, to provide the right advice, to provide the right service. Third, when a customer comes in we trying to resolve the complaint completely. One important change we made in our committee bank, and in my Opening Statement i mention we have made find a middle changes and our committee bank. Now when you come into one of our branches one of our bankers or talent doesnt say i cant handle your problem, call the 800 number. We settle right then and there. In addition, fourthly, as part of resolving the sales practices issues weve expanded to a nationwide mediation. So we pay for a mediator to work on behalf of our customers as an independent mediator to work on behalf of our customers to resolve complaints. Im happy to say that of the 43 million, 43. 5 million customers would reach out in the fourth quarter, those ones they came back i apologize because want to follow up and i appreciate the long detailed answer, and i think was made in good faith but i also think that force arbitration clauses always give the advantage to the employer, to the bank as we know. We know that. Thats an established fact that you are still can use those forced arbitration clauses to figure best of your customers the way you did with the suit in 13 of 15, and the case against the customers in utah. Why should we believe youre committed to changing your practices and being fair to customers when you continue to use that behind closed doors arbitration system that clearly doesnt allow customers their day in court . Senator, the reason is because i think weve made fundamental changes to the way that we do business so will limit the number of times that is speed limit the number of times is good to appreciate that but give them the day in court. Those that youre not able to help or that youre not able to satisfy. Senator, i look at the cfpb own study of the cfpb own study said that arbitration is fast and efficient for consumers, and the cfpbs own study said that the consumers have better returns, high resolutions with institutions speedy thats selective reading of the state they keep in mind the cfpb only came out of the question. Thank you, mr. Chairman. Senator kennedy. Thank you, mr. Chairman. Good morning, mr. Sloan. Thank you for being here. Thank you. Like you, i believe in the Free Enterprise system. I think the Free Enterprise system has lifted more people out of poverty that all the social programs put together. Im certainly not antibusiness. Quite the contrary. We all on this panel talk about the importance of jobs. I dont see how you can be for jobs and against business. What im curious about is what in gods name were you thinking . Im not against large. Unhappy with this this is a successful. Im not againstst big. With all due respect im against dumb. Im against a business practice which has wells fargo first and customers second. I think it ought to be Customer First and wells fargo second. I think its better for the customer and better longterm for wells fargo. When did this start . Senator, i completely agree with you. Wells fargo cannot be a successful american institution. We can employ 270,000 of what i think are the best team members unless we put our customers first. And there is no question that in our Community Bank we had an Incentive Plan that put selling products first as opposed to customers first. Nothing wrong with that if its good for the customer, but when did it all start . In this skated back to 2009 i believe. Senator, no. The board of directors, independent board of directors, independent board of directors, members off the board looked bak as far as 2002, and thats where they found, and i agree with them, that they saw instances of inappropriate Sales Activity under the plan. Senator, we shouldve ended that plan years ago. We made a mistake. Theres no question about that. Weve ended that plan. We have rolled a new Incentive Plan to your point in our Community Bank that Incentive Plan rewards good Customer Service. It rewards dividing products in the right risk mr. Sloan, i appreciate that and im really not trying to be rude. We just have a fiveminute limit, and our chairman and forces it pretty strictly, as he should. Whats the total number right now fake accounts you have found . Senator, in our review going back nearly eight years to 2009, we found, because we couldnt call 165 million people, what we did is we use a very conservative set of data metrics to look at, it was done by an independent party speedy what did you come up with . Potentially up to potentially 3. 5 million potentially unauthorized account. Thats back to 2009 . Thats correct. Did you go back further . We couldnt go back much further than that. The reason we took 2009 is one wells fargo and while kobe can together. As we were back further than that, the data starts to deteriorate. , which many did you make up of those 3. 5. 5 million fake accounts . Again, they were potentially unauthorized. There are some legitimate accounts in that number but lets assume that they were all inappropriate. We fund 190,000 accounts that we charged fees, and i i was approximately 6 million in total, and we we responded that. Was anybodys credit impacted . Not for those deposit accounts, but for the prevention chilite unauthorized credit card account potentially the credit coded been impacted, and were in the process of working to correct that. And you said you talked to theof Credit Bureaus, auditing cooperative . Yesterday are. You said they were not getting certain information . When we provide them information about customers, they cant provide us the detailed Credit History without the customer approval. So what they did is they gave us data without the customer names so we could i thought you could buy it from them . Pardon me . We cant buy. It from them. But thats whats very important, an important part of the 142 million settlement, and thats the linchpin of that and talk settlement is to make it right for a Credit History. So thats how theyll be able to get their Credit Histories six. In addition if they come to see us a course will go ahead to do that. Thank you, mr. Chairman. Let me just go through what we learned over the last year. In september of 2016 villard 2. 1 bring wells fargo nine wells fargo accounts had been fraudulently h set up. Credit checking, debit unauthorized setting up. July 7, 2017, we learned wellsrn fargo set of 800,000 Auto Insurance policies who didnt want or didnt need them. And then in august 2017 we learn an additional 1. 8 million, thats overt and above the 2. 1 million, 1. 4 million accounts are set up for unknowing customers. If you add those up that brings the accounts to 4. 3 million people, either fraudulent accounts or Insurance Companies if my math is correct if my math is correct. Thats over four times a the population of the state of montana. Its a pretty good size chunk of folks. The chairman and Ranking Member of this committee in Opening Statements basically ask you what have you done you can tell us today that has change this culture . This isnt one person. This isnt tellers on the ground. This has been a culture. So what can you tell me concisely that youve done, and i know youve talked about transforming your Community Banks, of what as ceo have you done for the board or whatever to ensure to us we will not be back here next week or month from now for a year from now talking about Something Else . Senator, i cant promise you perfection but i can promise you that we are working as hard as we can to get to near perfection. And that ise we are reviewing processes and procedures, turning over every stone. The first and foremost what we had to do and you criticized us for last year and youre absolutely right is we had to have executive team that took full responsibility for that. I was never one. Number two, we needed to reinforce that with our team. We went out and we talked to our team and we asked them what they were concerned about. Theyre concerned about things like pay, concerned about escalation of issues. Theyre concerned about things like executive accountability. They were concerned about things like revamping our equity lines and things like that. Our ethics lines, excusee me. The point is we listen to her team. As youre listening to the team that fundamental changes the culture. Senator, the proof of the pudding is our turnover is now down to its lowest level in four and a half years. In particular its down to its lowest level in our Community Bank were we had her biggest issues. Okay. Just to let t you know i hope ts all works because i think its absolute essential that it i works. If we are doing this again six months from now, its not going to be good. You talked about the things youve done, reviewing the customers and products from improving training, resolving problems. Talked about nationwide mediator. Who pays for the nationwide mediator . We do. Who chooses them . Ou the customer does. We go to independent mediation service. We provide them with a list of names. They can decide to do what use and we will pay for it. Let me talk a little bit about what the ranking of a aytalked about, and thats forcd arbitration. Is it true you are using forced arbitration when it applies to a real account on fake accounts . Senator, we have dealt with that issue the 142 million settlement. We didnt waive our right to arbitration but we did is we agree agreed to the settlement and we said to our customers coming to see us, we will make it right by them. If youre not happy will provide you with the mediator. That wasnt the question. The question is where you using forced arbitration from a real account and applying it to a fake account that was set up unauthorized . There were instances historically that we did that. Is that were not doing that today because when you commit to not use forced arbitration on accounts that were not set up without the authorization of the customer . Senator, it there is a situation in which a customer yes or no would work. Yes. You commit not to use that . It we have set up an account, right, that was and probably set up, roger lee set up without the customer can will make a right by them. You will not use forced arbitration . We will make it right by te customer. Let me point out that was being used six months ago i think by staff whispered in my ear that they were using arbitration on fake accounts that was set up on accounts. I completely appreciate your question and we are not doing that. You are not going to doon th. It we have set up an account okay, tim, the only time i get in fights with folks when they talk is when they dont give a yes or no answer when i would ask it. The question is this, and you can ask it another way, answer in another what if you want but will you commit to not use forced arbitration on accounts that were not authorized by the customer . The easy answer for that is yes because we havent done that. We are not doing that. And you will not do them looking forward. We are not doing that. Thank you, mr. Chairman. Senator scott. Thank you, mr. Chairman. Obviously the entire Banking Committee is at least irritated by what we have uncovered and what you guys have discovered over time, and part of it is insist on 20112015 you a i 2. 19 fraudulent accounts, then you went back and did another search and from 20092015 its now 70 increase. Were all those new accounts from 20092011 or did you miss some between 20112015 . The majority of the increase was in 2009 and ten, and then extending to september of 2016. But because we use an even more conservative view of the original timeframe of 20112015, we did pick up a few additional accounts. The vast majority of cyprus increase was 20092011 and 2009 2009 not within the first correct. 2009, then through 2016. Half 1 million customers were enrolled inn, online bank, bill pay without consent. 800,000 customers were charged for Auto Insurance without their knowledge. How about homeowners, Flood Insurance, property insurance . Because having spent 16 years in the insurance business, i will say Auto Insurance is probably the lower tier of what banks actually engage in charging customers for not having property insurance. Homeowners a significantly higher percentage of folks typically find themselves being charged at the bank temporarily, Flood Insurance is another very we see that happen often times. Are the numbers inrg the homeowners in the flood space just insignificant, or do you have a number for that . We havent found any issues of there, senator. Heres a thought. If you have to come back in six months, which i think it might be good for you to come back in six months to have another opportunity for us to know what happened over the same time were thoroughly. But my question is, if you havent found any instances of inconsistencies in your other insurancee related services, tht will be surprising from my perspective, having dealt with banks consistently for 20 years or so. How do we know, how do you know, did you say you have 165 million customers . We looked at 165 million accounts for that time. We have over 70 million customers. We serve one out of three u. S. Households. We didnt think it was one out of two. Out of the 70 million customers, your confident that 3. 5 million is the final number . Of potential unauthorized accounts, yes, i am. Let me talk for a second about the corrosive culture that doesnt start at local Retail Locations. It doesnt start with tellers. A corrosive culture starts at the top, and then it seeps into the conditions and it germinates, and then folks feed off of that. How have you changed the corporate leadership and the Corporate Culture that will find itself in the conditions at Retail Locations . Senator, first we look at what were, what caused the problems in a retail bank. First and foremost the issue within our retail bank was we had an Incentive Plan that drove an inappropriate sales culture. That Incentive Plan has been ended and. Weve we rolled outw Incentive Plan. The feedback weve gotten from our team since we rolled back that plan can weve now had two full quarters, well get the results of the third quarter, is they arere overwhelmingly very please with the plan. As we survey them they are telling us that they like the new conditions at wells fargo. Theyre very happy. Weve actually hired back and we have hired 17,000 new team members into our retail bank since september, since we made these changes. Of those, 10 or about 17, 1814 members that had worked in the retail bank that left because of the old culture, or were dismissed because they didnt meet certain sales quotas. To me those folks coming back and agreeing to be part of the team reinforced the changes were making an hour Community Bank are taking hold. Thats good to hear that some folks want to come back. Your sales culture isnt driven by the sales products. I think send it arounds testify as in other insurance guy that ultimately its not the sales goals. Its not the product selection. Its the people. Its the people who are in management positions who put more pressure results than an average person can get. If you havent changed the people, its quite difficult tor change the culture. I completely agree with you. Thats why i named the new head of our Community Bank group who i mentioned, mary merrimack, ig an excellent job. She has gone through each one of the levels of management, and had o everyone literally reappy for the job. We reduced the number of managers to change the span of control. Wea eliminated a layer, but i agree the issue is not just the Incentive Plan. It was that we created a culture of managers that ona had to manage because that plan. So getting rid of the plan, going through and making sure the best managers, and then now were in the process of retraining everybody starting at the top. The senior levels before we get down to the folks in our branches. I completely agree with you. Thank you, sir. Senator warner. Thank you, mr. Chairman. Mr. Sloan, when you were named ceo after the fake account scandal, you are asked why a career as a wells fargo insider like you, why that made you the right person to fixy the fundamental problems at the bank, and you said, quote, because ive been making change for 29 plus years at wells fargo. Sols i want to take a look at yr time at wells fargo. From 20112014, the height of when wells fargo was cheating customers by opening fake accounts, you serve as a chief financial officer, and as cfo he spoke to potential wells fargo investors a lot. On those calls you aggressively promoted wells fargo ability to open up accounts, didnt you . No, i didnt. No, you didnt . Well, here are the transcripts from all of the investor earnings calls that you participated in from 20112014. I have read through them, and on these calls no c one, not even john stumpf who was the ceo at the time bragged more about wells fargo does ability and commitment to open new accounts for existing customers. In the april 2011 call for example, i think i mark that one,m you said i cant wait to get a credit card in every one of ourur red or the customers wallets. Nothing about whether your customers wanted or needed a wells fargo credit card. All that mattered was opening new accounts. So while you were bragging to investors about opening new accounts on these calls from 20112014, you also personally owned roughly 2 million shares of wells fargo stock, is that right . Senator, i dont recall how much stock at odin wells fargo. Im a very bad shareholder. Thats in your sec filing. Its public. Its all out there. 2 million shares. So looks like you had a really good thing going. Talk up wells fargo ability to open up new accounts, the investors excited and hey, if the stock goes up by one dollar, you make a t cool 2 million buc. Then in december 2013, almost three years into your time as cfo, the l. A. Times published a long article on the relentless pressure wells fargo put on employees to open new accounts. The article was based on a review of internal wells fargo documents, court filings, interviews with more than 30 current and former wells fargo employees. The article specifically said that employees had opened fake accounts in response to this pressure. Now, you interviewed for that piece, mr. Sloan, and you said quote, im not aware of any overbearing sales culture. That is really interesting phrasing. Im not aware of any problem. So when the l. A. Times came to you and showed you concrete evidence of a terrible problem with fake accounts at your bank, did you launch an investigation into the issue before brushing it off . Senator, first as relates too my comments in 2011, im proud of the credit card products that we have at wells fargo. Thats not the question im asking. I just ask him you brush it off. He said im not aware of any problem. Did you open an investigation would simulate out evidence of fake accounts . Senator, in the interview to the best of my recollection with the l. A. Times they didnt provide it with information. It was soon after that, but as an agent speedy so i take that as a no. When youe are asked the questio, you did not open an inquiry into it, is a right . Senator, begin the l. A. Times didnt provide me with any document. It was a phone call. After that time did you read the article . I read the article, yes. Then you open an investigation immediately . Ut, that was a time when the Community Bank elevated this issue to the scene a leadership team. Thats the we begin to take action. Lets talk about that time. You didnt look into the fake accounts that you went right back to pumping up the stock price by bragging about wells fargos Record Number of new accounts on your very next investor call. Now lets forwarded to 2016, two months months before the fake account scandal became public. You within the chief operating officer of wells fargo. An interviewer as to whether you thought the bank had pushed sales goals and cross selling too far and your answer was quote, no. The funmental strategy that we have is that going to change. That is july of 2016, just before this breaks open. According to wells fargos own investigation by july 2016, you knew that thousands of employees have been fired for opening fake accounts and other sales violations. You knew aggressive crossselling goals were to blame, and still you publicly said the bank didnt have a problem, right . Senator, thats incorrect. You didnt say this that you were quoted. Could you read the entire quote and can we go through the entire presentation . When asked about whether or not you pushed in place to park in your answer was no. The fundamental strategy that we have is not going to change. And i. Was referring to the vision of our company. The vision including the fake scandals you are being asked about . Every time i give a presentation tour team and i start with our vision which is to ground people in the culture of our company, which is our job is to satisfy our customers financial needs and to help them succeed financially. Thats the context i made that statement. Since t i become ceo ive been fundamental changes to address the issues that were talking aboutsi today. Mr. Sloan, you are asked about pressure on employees which causedbo the fake account scandal. We all know that now. Its public. You knew there was a problem and when youre asked about it you lied. This is about personal responsibility. Wells fargo cheated millions of people for years. The Federal Reserve should renew all of the current Board Members who served during the fake account scam. And, mr. Sloan, do you think you been making changes at wells fargo for 30 years but you enable the fake account scam, you got rich off it and then you tried to cover it up. At best youwh are incompetent. Worst you were complicit. And either way you should be fired. Wells fargo needs to start over and that wont happen until the bank rids itself of people like you who let it into this crisis. Thank you, mr. Chairman. Mr. Chairman, cut i respond to that . Yes, you may. I won equal amount of time. Senator, a couple things. First, and ill get to your criticism of the in a moment but first lets talk about the board. I think the board is taken very important steps in terms of a thorough independent investigation. Thats been made public. Thats number one. Number two, the board has taken very strong action in terms of executive accountability that is unfortunately some of the highest in corporate american history. Again, unfortunate. So i dont believe that your criticism of the boards are active. As it relates to me, i get i think the reason i am the right person to run this company today, notwithstanding your criticism, is because i have been making change at this company for 30 years. I have made mistakes. I certainly have been perfect but i think having that knowledge of the company, having the ability to make the change, the actions that are taken since i become see eo 11 months ago have made fundamental change at this company so im not afraid to make hard decisions when its needed, and ive the support of 270,000 people. As i think thats what i think im the right person. Can i make a short comment on this . I know we are over. But i really want to say, are you kidding . Look, youve been there for 30 years and every one of my colleagues on both the republican side and the democratic side who have spoken so far have talked about a broken culture at wells fargo. Have talked about the fact the problem starts with leadership. The people who were there and leaving wells fargo during the time of a years long scan, and multiple scans as our chairman pointed out, those people should not be left in charge of this business. And when you promoted exactly what was wrong with this bank over and over and over, you went to the stock market and you bragged about it. You make money personally off it. When you asked about it, you did not tell the truth and you tried to cover it up. Wells fargo is not going to change with you in charge. Senator rounds is next added to ask the senators to Pay Attention to the time limits. Thank you, mr. Nt chairman. I know that we are not supposed to be in the middle of this, we normally get five minutes, and so cant isdd going and go back because i know that some cases you dont get the opportunity to respond but i think there was one area that are want to hear your full response to it. That is, you said basically as senator warren has indicated that you wanted to see everybody with a credit card, or at least all of your folks with a credit card. E would you please go into what you meant by that statement . Well, sure. Were in the banking business and won the products wem provide to our customers is a credit card. And anyone of w our customers tt comes in to see us that is interested in aes credit card, e would like to provide it to them. Im proud of hard workk and effort of all of our team members to work in a credit card group. Weve seen growth in the group because customers like using the product. Im not embarrassed about that. Whatever adjective or adverts are usedhe to describe what i my have said or did that are taken out of context is inconsistent with the fact that our job is to satisfy our customers financial needs. If the financial need means they want a credit card and if we have the right product, i would love for them to have. Thats what we do. Would you agree that the was a broken culture at wells fargo during this time . Senator, i would agree that in our . Community bank with fundamental problems that created serious cultural issues. In terms of the rest of the company, there were other issues but it wouldnt say in the rest of the company was a broken culture. Having said that, as ceo and acknowledging ive been there for 30 years are some that dont think i i should be in this ro. Weve heard that today. What did we do as a relates to culture . We went out and we asked third parties to help us do new culture surveys to make sure that we were not missing anything here because even though ive been there for 30 years and ive done things sometimes good and sometimes ive made mistakes, i do want to be in d a position where its jt what i think we should be doing. I want to make sure were listening to outside experts, listening to all of our stakeholders and listening to our team members. We are making fundamental changes inin the company to address any sort of cultural weaknesses that we are. One area i think weve got concerned with in particular is wells fargo has, i i want to me sure that members of the military, that they really do have some special Legal Protections under the servicemembersct civil relief at such as the protections to the soldiers credit or property when theyre serving on active duty. And want to go into this but can you please discuss t some of the wells fargos that has tried to improve its compliance with the servicemembers civil relief act, particularly in light of the firms sales practice issues . Can you go into this to give some assurance there have been changes made with regard to how servicemembers are treated with regard to their credit activities . Senator, we care about all of our customers but i dont think theres any one Customer Group caremore about that our servicemen and women we created what we call a center of excellence that looks across the entire company to manage the cra matters. That said of excellence is staffed with experts that only look at the ways in which we can provide the appropriate benefits to ourur servicemen and women. We work very closely with the Defense Department to make sure that we get on a daily basis updates from the Defense Department in terms of service men and women which of our customers are now on active duty. That puts them in a completely different category. We are very proud of the fact that weve made significant improvements. Weve had historical issues, no question about that, but we needed to make fundamental change to create a center of excellence come to staff at a properly and to make sure theyre looking across the company. In addition to that im very proud ofx the fact we have 8500 team members who are veterans. Made a commitment as c eo that want to hire another 20,000 by 2020. Y 2020. We provide a Financial Education services to hundreds of thousands of servicemen and women so they can manage their finances appropriately. Weve donated more than 300 homes free of charge to wounded veterans so they can have a place to live. Youve used a thirdparty to come back in and do the analysis on the accounts and to identify problems. You continue to use a thirdparty are you going to continue to use a third party to doublecheck in terms of whether or not the proposals are followed through on . Well, as relates to the 165 million accounts and going back the additional eight years, thats effectively what we did, we went back and doublechecked the prior period that we disclosed. Weve put in additional policies and procedures in place to be able to address those issues and those are independent of the business line. Thats one of the issues that we had before. When there was an issue historically. My time expired. Are you going to continue to use a third party to review in terms of Due Diligence to make sure that its actually that the changes made are actually being implemented . Were bringing in third parties to look at various policies and procedures across the entire company, so the answer is yes. Thank you. Thank you. Thank you, mr. Chairman. Mr. Sloan, the occ has the Statutory Authority to revoke a National Charter of a bank if its found to violate the National Bank act. Why shouldnt the occ consider revoking your charter . Senator, because we provide products and services to one out of three american households. Weve talked about many mistakes that weve made, but today, we more often times than not, we do that appropriately. The company is growing, and the Company Provides jobs to 270,000 people. So youre too big . No, no, were not too big at all, im reinforcing that every day we have 270,000 team members that go out and that sounds like what you said, that the reason that your charter shouldnt at least be considered for revokecation is the first thing out of your mouth was your size. No, the first thing out of my mouth was our customers that we serve one out of every three customers. We take that responsibility very seriously, when you look at the bank in totality today, were doing many more things right than we are wrong, but i appreciate that today were talking about wells fargo one year later and the changes that ive sure, im sorry, im going to cut you off. I want to go five minutes only. That does sound to me that too big. Well allow the Panel Members and the audience whether or not your answer suffice. Im not an expert in banking so i want you to explain this to somebody back home. You made 21 billion in profits last year, you made a nice salary, i dont want to personalize this, your board makes better than a nice amount of money. You were coo when it lot of this went down and now youre ceo. Explain to the man on the street why this is fair. Im not 100 sure i know what you mean by this. And you get a promotion and people in charge get lots and lots of money, not all the consumers, but lots of consumers get harmed. Explain to me in plain english, why this is fair. Senator, ive taken responsibility for the mistakes made at the company, im taking action in my role has ceo to make wells fargo a better bank than it was a year ago, it will be a better bank in the future. Were taking concrete action and were providing im proud of the fact that our bank is the largest Small Business lender, the largest home lender. We make a difference to americans every day. Back to you deserve, you deserve the right i only have two more minutes, it occurs to me that only in financial services, only in this industry where people can make such massive errors and there doesnt appear to be accountability and only because of your size do we not understand totally which statutory tools, which regulatory tools, which consumerbased tools we have for a remedy. At a briefing to our staff, wells fargo said that banks would make goodwill payments to customers who had their cars repossessed and you had opened accounts for them. And how customers to send in a farm explaining how much they were harmed and how much they need to be whole and paid up to 2,000, sort of no questions asked. So then my question is, why not just cut checks up to 2,000 for all of those impacted . Because the only reason i can think of putting the burden on consumers to ask for this goodwill money that youve already approved is that youre hoping many of them wont do it. So, can i have your commitment to go ahead and presumptively push out the money, rather than force people to figure out that they have this right and that theyre likely to be approved up to 2,000, but theyve got to go through the paper work . Can i have your commitment today . No, what you have my commitment is that were making the 500 goodwill payment to every one of those customers will they were impacted or not and you have my commitment that well make sure well make it right for the customers to the extent they were impacted. If we need to do more than 2,000 to make it right, we will do that. Can you please provide the committee with a list of all legislation that wells fargo has lobbied for or against since 2010 . Well respond to whatever inquiry. Thats my inquiry if you can respond to the committee. Thank you. Senator tillis. Thank you, mr. Chair, mr. Sloan thank you for being here. The third party assessed 90 out of 93 million open you look back 2 1 2 million appeared to be unauthorized and eight year back, 165 million accounts opened and i think that was about thee and a half million unauthorized. Potentially unauthorized, senator. Ive got to go back. I want to talk more about how you focus on the customer and make this very easy for them to recover from. I served on the Veterans Affair committee and i got a call from veteran in north carolina. The wife was opening the mail and honey, i dont know that you were dead. And the va sent a notice he was somehow discategorized that he was dead. He had a military car. Va said there are reames of paper work and phone calls youll need to make to get reinstated and get your veterans benefits. Now, tell me how in making this right that im know the getting on a phone, listening to elevator music, getting transferred to several different accounts, in other words, how are you maximizing minimizing the customers time in getting this right and then similarly, how are any effect on underlying credit reporting agencies being dealt with, too, as a part of getting this right . In other words, is it my problem to deal with clearing up the accounts that i didnt authorize through an equifax or through a Credit Rating agency . Tell me about the process. To answer your question, we reached out to 43 1 2 million customers via their statements and email and said something simple, if theres anything about your accounts that you think isnt right come in and see us, and we will make it right by you. And about 41,000 have come in to see us. Most of those situations have been resolved with the customer right there to the extent that theyre not pleased with what weve offered, weve offered them Free Mediation Services and we pay for mediation and address the issues. Once i became ceo, the Customer Service branches historically when a customer came in we hadnt delegated ability for a banker in one of our services and. We say, great, you have an issue, call 1800 Customer Service number. That wasnt great experience. And under the new head of the Community Bank, mary mack, shes delegated authority down, when a customer has an issue we try it deal with as many as we can. In addition, weve increased staffing for our phone Customer Service as well as the customers that come in via online or via mobile. So were trying to do a better job. I introduced six goals for our team in march, and the number one goal is that we want to provide the best Customer Service and advice in the industry. Weve got work to do, senator. Id love to tell you that were number one right now, but were not. I want to make sure we have enough resources. What sort of so were trying to figure out, did i use the 93 million, and 2 million potentially unauthorized or 165 million, 3 1 2 potentially unauthorized and then its a fraction of those that actually incurred fees or any charges. Is that correct . Thats correct. Okay, so for all the other ones, just as a selfgoverning matter. I was in the Banking Industry before i went into politics, you dont like opening up accounts that have no activity because theres inherent costs youre incurring. This is a natural im trying to figure out where the Circuit Breaker didnt click and whether or not those Circuit Breakers have now been fired so were trying to get to the government issues that i have confidence you would work on and wells fargo would work on. Tell me more about governance in my remaining 25 seconds. As relates to governance for the entire couple. The investigation, thats been made public and the board made changes in terms of executive accountability which totalled 180 Million Dollars of compensation that was clawed back or not authorized. The board, theres a new ceo, thats me. We have an operating committee of which five of the ten members are now have new roles. Weve taken the responsibility and the criticism in the boards independent report that said that management didnt provide information to the board in a as well as we could have. I completely agree with that. Weve revamped the way that weve done that. Theres been a lot of governance changes. Most importantly within the company, its taking the Enterprise Risk Control function, Human Resources, compliance, credit, you name it, and centralizing all of those so that we have a better check and balance between the business lines and risk, and then creating a conduct office in the risk function to be able to independently look at complaints and ethics lines, questions and all kinds of things that would indicate that we have any issues in the company. I get those reports now and that wasnt happening a year ago. Senator van holland. [inaudible] i was listening to your response to senator tester about the issue of forced arbitration. Simple question, who knows best whats in a customers interest . Wells fargo or your customer . I think that it frequently is the customer and thats why its very important from my perspective to get it right so that we dont get the if your customer knows best why do you deny them the ability to go to court . Why do you require your customers if they know best to go to mandatory arbitration. We dont do that for all of our products and services. Why do you do it for some of them if your customer knows best. I think that many a simple question, why do you deny them the opportunity to go to court and require arbitration . Because most of the independent studies including one done by the cfpb two years ago its better for the customer mr. Chairman, if the customer makes the a customer brings the case, right . Right . So if a customer decides its in his or her best interest, forget about studies. We also know what the Consumer Financial protection, what they recommended, they recommended that we get rid of forced arbitration. You said to senator testor you would not forced arbitration with regards to the fake accounts. Do you remember that answer. Yes, i did. Theres an article, monday in september 2017 a short time ago in a case in utah, wells fargo lawyers have actually taken the position that the the senate is about to gavel in for a pre pro forma session. Well come back to t