    [Senate Hearing 114-510]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-510

         AN EXAMINATION OF WELLS FARGO'S UNAUTHORIZED ACCOUNTS AND THE
                                   REGULATORY
                                    RESPONSE

    =======================================================================

                                    HEARING

                                   before the

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

       EXAMINING WELLS FARGO'S UNAUTHORIZED ACCOUNTS AND THE REGULATORY
                                    RESPONSE

                                   __________

                               SEPTEMBER 20, 2016

                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban Affairs

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     Available at: http://www.fdsys.gov/

                                _________

                    U.S. GOVERNMENT PUBLISHING OFFICE

     23-001 PDF                 WASHINGTON : 2017
    ____________________________________________________________________
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                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      RICHARD C. SHELBY, Alabama, Chairman

    MIKE CRAPO, Idaho                    SHERROD BROWN, Ohio
    BOB CORKER, Tennessee                JACK REED, Rhode Island
    DAVID VITTER, Louisiana              CHARLES E. SCHUMER, New York
    PATRICK J. TOOMEY, Pennsylvania      ROBERT MENENDEZ, New Jersey
    MARK KIRK, Illinois                  JON TESTER, Montana
    DEAN HELLER, Nevada                  MARK R. WARNER, Virginia
    TIM SCOTT, South Carolina            JEFF MERKLEY, Oregon
    BEN SASSE, Nebraska                  ELIZABETH WARREN, Massachusetts
    TOM COTTON, Arkansas                 HEIDI HEITKAMP, North Dakota
    MIKE ROUNDS, South Dakota            JOE DONNELLY, Indiana
    JERRY MORAN, Kansas

               William D. Duhnke III, Staff Director and Counsel

                     Mark Powden, Democratic Staff Director

                        Dana Wade, Deputy Staff Director

                        Jelena McWilliams, Chief Counsel

                           Beth Zorc, Senior Counsel

                    Shelby Begany, Professional Staff Member

                Laura Swanson, Democratic Deputy Staff Director

                    Graham Steele, Democratic Chief Counsel

                           Dawn Ratliff, Chief Clerk

                          Troy Cornell, Hearing Clerk

                          Shelvin Simmons, IT Director

                              Jim Crowell, Editor

                                      (ii)

                                C O N T E N T S

                                  ----------

                          TUESDAY, SEPTEMBER 20, 2016

                                                                       Page

    Opening statement of Chairman Shelby.............................     1

    Opening statements, comments, or prepared statements of:
        Senator Brown................................................     2

                                   WITNESSES

    John G. Stumpf, Chairman and Chief Executive Officer, Wells Fargo
      & Co...........................................................     5
        Prepared statement...........................................    71
        Responses to written questions of:
            Senators Brown, Reed, Schumer, Menendez, Tester, Warner,
              Merkley, Warren, Heitkamp, and Donnelly................   160
            Senator Brown............................................   111
            Senator Reed.............................................   115
            Senator Menendez.........................................   122
            Senator Warner...........................................   128
            Senator Merkley..........................................   134
            Senator Sasse............................................   135
            Senator Warren...........................................   151
    James Clark, Chief Deputy, Office of the Los Angeles City
      Attorney, on behalf of Michael N. Feuer, City Attorney, City of
      Los Angeles, California........................................    51
        Prepared statement of Michael N. Feuer.......................    74
    Thomas J. Curry, Comptroller of the Currency, Office of the
      Comptroller of the Currency....................................    53
        Prepared statement...........................................    75
    Richard Cordray, Director, Consumer Financial Protection Bureau..    54
        Prepared statement...........................................    81

                  Additional Material Supplied for the Record

    Written statement of Khalid Taha, before the Congressional
      Progressive Caucus Briefing: ``Banking on the Hard Sell,'' on
      June 10, 2016..................................................   184
    Written statement of Julie Miller, before the Congressional
      Progressive Caucus Briefing: ``Banking on the Hard Sell,'' on
      June 10, 2016..................................................   186
    National Employment Law Project Report, ``Banking on the Hard
      Sell: Low Wages and Aggressive Sales Metrics Put Bank Workers
      and Customers at Risk,'' by Anastasia Christman................   188

                                     (iii)

                        AN EXAMINATION OF WELLS FARGO'S
               UNAUTHORIZED ACCOUNTS AND THE REGULATORY RESPONSE

                                  ----------

                          TUESDAY, SEPTEMBER 20, 2016

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met at 10 a.m., in room SD-538, Dirksen
    Senate Office Building, Hon. Richard Shelby, Chairman of the
    Committee, presiding.

            OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

        Chairman Shelby. The Committee will come to order.
        Today, we will learn more about the events and the
    circumstances that led to the enforcement action against Wells
    Fargo by the Los Angeles City Attorney, the OCC, and the CFPB.
    But first today we will receive testimony from John Stumpf--he
    is Wells Fargo's CEO and Chairman--who is with us today.
    Welcome, Mr. Stumpf.
        We will then hear from the Los Angeles City Attorney's
    Deputy Chief whose office was the first to commence an action
    against Wells Fargo on this issue and, finally, from the OCC
    and the CFPB. We look forward to hearing from both panels
    because much remains unclear about what transpired at Wells
    Fargo and the regulators' response.
        It appears that Wells Fargo's own analysis concluded that
    thousands of its employees opened more than 2 million accounts
    that may not have been authorized.
        Subsequently, Wells Fargo terminated approximately 5,300
    employees and has agreed to pay $185 million in fines and $5
    million in customer remediation.
        Sales data show that Wells Fargo has been an industry
    leader in its ability to cross-sell products, such as credit
    cards, checking accounts, and home equity loans.
        A number of former Wells Fargo employees have described a
    work environment characterized by intense pressure to meet
    aggressive and unrealistic sales goals.
        In a 2010 letter to shareholders, Mr. Stumpf wrote that
    Wells Fargo's goal was eight products per customer because
    eight ``rhymed with great.''
        The result was a corporate culture that drove company
    ``team members'' to fraudulently open millions of accounts
    using their customers' funds and personal information without
    their permission.
        I have often said that banking is based on trust, and that
    trust was broken at Wells Fargo.
        While much has been written about these events, I believe
    there are several questions that warrant answers.
        First, when did this conduct start at Wells Fargo and why
    were the regulators unaware of this growing problem?
        Second, when did Mr. Stumpf and his senior management
    become aware of these activities and how did they respond?
        Third, have all of the appropriate Wells Fargo employees
    been held accountable and to what extent?
        Finally, where were the Federal regulators while certain
    Wells Fargo employees were taking advantage of unsuspecting
    customers over a period of many years?
        Here is what we do know: Wells Fargo's internal review only
    covers unauthorized accounts dating back to 2011. News reports
    and court documents suggest these problems might have existed
    long before then.
        The 2013 Los Angeles Times articles led to the LA City
    Attorney's Office investigation into Wells Fargo's sales
    practices.
        Thousands of man-hours by a dozen dedicated LA City
    Attorneys culminated in a lawsuit filed against Wells Fargo in
    May of 2015.
        This timeline begs the question: Where were the Federal
    regulators during those years? If the OCC and the CFPB were
    aware of these issues before the LA City Attorney's lawsuit,
    why did they wait until 2016 to bring an enforcement action?
    Why did it take a Los Angeles Times reporter to uncover what
    should have been uncovered by Wells Fargo's regulators?
        If there were ever a textbook case where consumers needed
    protection, this was it. How many millions of unauthorized
    accounts does it take before the CFPB notices? And while the
    Bureau is billing this as the largest settlement in its
    history, it is unclear whether it had any significant role in
    discovering or investigating the bank's conduct.
        Just as it is fair to ask Mr. Stumpf what he knew, when he
    learned it, and what he did about it, it is also fair to ask
    those same questions of Wells Fargo's regulators.
        These are simple facts-and-circumstances questions that
    both the OCC and the CFPB should be able to answer without
    violating any confidentiality restrictions.
        I look forward to today's hearing as both Congress and the
    American people--especially the aggrieved consumers--have been
    kept in the dark for far too long.
        Senator Brown.

                   STATEMENT OF SENATOR SHERROD BROWN

        Senator Brown. Mr. Chairman, thank you for calling this
    hearing. I want to commend the city of Los Angeles, the OCC,
    and the CFPB for their actions, and the Los Angeles Times for
    bringing this to light. I was stunned when I learned of the
    breadth and the duration of the fraud committed by Wells Fargo.
    I hope today we can begin to understand what went wrong and
    what needs to be done.
        I call it ``fraud'' because I got tired of the euphemisms a
    long time ago. I think the American people did, too.
        This is not a matter of customers who `` . . . received
    products and services they did not want or need,'' as Wells
    Fargo puts it. That makes it sound like there was a mix-up
    under the Christmas tree and I got the right-handed baseball
    glove that was meant for my brother Charlie.
        This is 5,300 employees--Wells Fargo calls them ``team
    members''--5,300 team members forging signatures, stealing
    identities, Social Security numbers, and customers' hard-earned
    cash so as to hang on to their low-paying jobs and make money
    for the high-paid executives at Wells Fargo. And they did it
    for at least--at least--5 years.
        Wells Fargo's reaction has been remarkable. It did not
    treat this as a big problem until it appeared in the
    newspapers. It did not begin to make customers whole until this
    year. And we do not know whether the bank chose to do so or was
    told they had to do so.
        Wells Fargo is taking out full-page ads claiming it is
    accountable and accepts responsibility. It has not admitted to
    responsibility for a single misdeed in the dealings with the
    city of Los Angeles and the Federal Government.
        Wells Fargo claims to have made things right with its
    customers, but its efforts have been incomplete. For example,
    it is not clear that PwC calculated the cost of a lower credit
    score, which might be paid every month for 30 years.
        At times, the bank has been downright hostile to aggrieved
    customers.
        Rather than letting fraud victims have their day in court,
    Wells Fargo forced customers to abide by the mandatory
    arbitration clauses in their real accounts. You heard that
    right: The bank invoked the fine print on a real account to
    block redress on a fake one that Wells Fargo had created.
        Wells Fargo team members, many struggling to support a
    family on $12 or $15 an hour--my understanding is Wells Fargo
    tellers make about $11.80 an hour. Wells Fargo team members,
    struggling to support a family on $12 to $15 an hour, followed
    their managers' guidance to do whatever it took to make their
    quotas. Some may have worked off the clock; others cut corners
    to avoid being fired for missing goals--goals that Wells now
    admits were too high.
        They have been accountable, these low-income workers. The
    workers lost their jobs with no parachute of any color.
        And it is not just 5,300 team members who paid the price,
    because many more were fired when they could not meet the
    quotas, and still more chose to quit rather than cheat.
        By contrast, Ms. Carrie Tolstedt, the Senior Executive Vice
    President for Community Banking, has done quite well. She knew
    of this problem at least 5 years ago and is retiring with a
    package that may be worth more than the CFPB's record fine of
    $100 million.
        So 5,300 team members, earning perhaps $25,000, $30,000,
    $35,000 a year, have lost their jobs, while Ms. Tolstedt walks
    away with up to $150 million.
        Despite firing thousands of team members, Ms. Tolstedt
    apparently decided it was not important enough to alert the
    head of the company, Mr. Stumpf, or the board of directors or
    anyone else for 2 years, if ever, even though you both sat on
    that bank's board.
        Senior management and the board of directors apparently
    agreed. Once the scandal became public, remedial actions were
    stepped up against front-line team members, but the praise and
    performance bonuses continued to be lavished upon Ms. Tolstedt
    until as recently as 2 months ago.
        You would think the lessons of the financial crisis, which
    came at such a high cost to our country, would change the way
    the banks do business.
        And to be fair, many banks did take the lessons of the
    financial crisis to heart. But for the largest banks in this
    country, every week we hear of a new lawsuit or enforcement
    action against one of them--week after week after week after
    week.
        What are some of these lessons? First, the culture in these
    banks needs to change. That starts at the top.
        Second, there must be a reliable way for legitimate
    complaints to end up in the C-suite rather than the circular
    file.
        Third, in the wake of the rampant robosigning fraud that we
    saw at Wells Fargo and other places, banks need better
    controls.
        Because, fourth, if you pay people on the basis of how many
    products they sell, that is what they will do, whether it is in
    the interests of the customers or not. And base pay needs to be
    increased.
        Finally, change the pay structure, or at least make
    incentives deferred, so it is clear that customer and company
    interests are aligned and enduring.
        Wells Fargo has come up short on all five counts. That
    conclusion is not just based on this, its latest scandal.
        Last year, Wells settled with the OCC for, among other
    things, 11 years' worth of deceptive practices in selling
    enhanced identity theft protection. So at the same time--think
    about this. At the same time the bank was stealing customer
    identities, it was charging for protecting them.
        If the Wells' ID theft product that they sold did not
    discover the fraudulent Wells' accounts, perhaps some refunds
    are due.
        This April, Wells settled a False Claims Act suit for $1.2
    billion, in part because it had used bonuses to get staff to
    ``churn out and approve an ever-increasing quantity of FHA
    loans . . . and applying pressure on loan officers and
    underwriters to originate and approve more and more FHA loans
    as quickly as possible.'' Thousands of Americans, as we know so
    well--although, unfortunately, far too few of us know any of
    these people personally. Thousands of Americans lost their
    homes through mortgage foreclosures as a result.
        So I hope, Mr. Stumpf, you will level with this Committee
    and the public. Words that come like a San Francisco fog on
    little cat feet will not cut it. These were not magically
    delivered ``unwanted products.'' This was fraud--fraud that you
    did not find or fraud that you did not fix quickly enough.
        Instead of focusing on damage control, you need to admit to
    the problems and fix them and treat your customers in real life
    like you do in your vision statement. That would be the best
    damage control of all--for your customers, for your bank, for
    your industry, and for our country.
        Thank you,
        Chairman Shelby. Mr. Stumpf, will you rise and be sworn?
    Raise your right hand. Do you swear or affirm that the
    testimony that you are about to give is the truth, the whole
    truth, and nothing but the truth, so help you God?
        Mr. Stumpf. I do.
        Chairman Shelby. You may be seated.
        Mr. Stumpf, your written statement will be made part of the
    hearing record. You may proceed as you wish. Welcome to the
    Committee.

       STATEMENT OF JOHN G. STUMPF, CHAIRMAN AND CHIEF EXECUTIVE
                       OFFICER, WELLS FARGO & CO.

        Mr. Stumpf. Chairman Shelby, Ranking Member Brown, and
    Members of the Committee, thank you for inviting me to be with
    you today.
        I am Chairman and Chief Executive Officer of Wells Fargo,
    where I have worked for nearly 35 years. It is my privilege to
    lead this company, which was founded 164 years ago and has
    played a vital role in the financial history and development of
    our country. We employ more than 268,000 team members, 95
    percent of whom are in the United States. One in every 600
    working adults is a member of the Wells Fargo family, and we
    have a presence in all 50 States.
        I am deeply sorry that we failed to fulfill our
    responsibility to our customers, to our team members, and to
    the American public. I have been through many challenges with
    Wells Fargo, but none of which pains me more than the one we
    will discuss this morning.
        Wrongful sales practice behavior in our retail banking
    business goes against everything regarding our core principles,
    our ethics, and our culture. It runs counter to our vision of
    helping our customers succeed financially, and it is not
    representative of Wells Fargo as an institution.
        I am here to discuss the situation today, tell you about
    the
    actions we have taken, and our commitment on how to move
    forward.
        Our entire culture is centered on serving our customers,
    and in this case, we let our customers down. Our retail banking
    practice issues, these sales issues, are not a reflection of
    our hardworking and talented team members who deserve thanks
    for helping our customers with their financial needs.
        I want to make very clear that we never directed nor wanted
    our team members to provide products and services to customers
    that they did not want. That is not good for our customers, and
    that is not good for our business. It is against everything we
    stand for as a company.
        That said, I accept full responsibility for all unethical
    sales practices in our retail banking business, and I am fully
    committed to fixing this issue, strengthening our culture, and
    taking the necessary actions to restore our customers' trust.
        And, Senators, let me tell you here today, the Wells Fargo
    board is actively engaged in this issue. The board has the
    tools to hold senior management accountable, including me and
    Carrie Tolstedt, the former head of our retail banking
    business. Any board actions taken with our named executive
    officers will be appropriately disclosed. And I want to be
    clear on this: I will respect and accept the decision of the
    board.
        Under new leadership we have already begun taking steps to
    ensure that the sales culture in our retail banking business is
    wholly aligned with our customers' interests.
        On September 13, 2016, we announced a major decision that
    we will end product sales goals for everyone in our retail
    banking business because we want to make certain that nothing
    gets in the way of doing what is right by our customers. The
    new leadership team's primary mission will be to provide the
    best possible service to our customers.
        I am also announcing today three new initiatives that will
    reinforce our commitment to our customers.
        First, we are expanding the scope of our account review and
    remediation to include both 2009 and 2010.
        Second, we will be contacting every single one of our
    deposit customers across the country using the same process
    that we agreed to with the city of Los Angeles for our
    California customers.
        And, third, we have begun contacting hundreds of thousands
    of our customers with open credit cards, including those for
    whom we have already refunded fees, to confirm whether they
    need or want their credit card.
        In addition, we have recently started sending customers a
    confirmation email within 1 hour of opening any new deposit
    account and an acknowledgment letter after submitting a credit
    card
    application.
        We recognize now that we should have done more sooner to
    eliminate unethical conduct or incentives that may have
    unintentionally encouraged that conduct. We took many
    incremental steps over the past 5 years in an attempt to
    address these situations, but we now know those steps were not
    enough.
        In 2011, a dedicated team began to engage in proactive
    monitoring of data analytics specifically for the purpose of
    rooting out sales practice violations.
        In 2012, we began reducing sales goals that team members
    would need to qualify for incentive compensation.
        In 2013, we created a new corporate-wide enterprise
    oversight team for sales practices issues.
        In 2014, we further revised our incentive compensation
    plans to align pay with ethical performance.
        In 2015, we added more enhancements to our training
    materials, further lowered goals, and began a series of
    townhall meetings to reinforce the importance of ethical
    leadership and always putting our customers first.
        Throughout this 5-year period, we identified potential
    inappropriate sales practices. We investigated those, and we
    took disciplinary actions that included terminations of
    managers and team members for sales policy violations--the
    5,300 terminations over these 5 years that have been widely
    reported.
        Despite all of these efforts, we did not get it right. We
    should have realized much sooner than the best way to solve the
    problems in the retail banking business was to completely
    eliminate retail bank products sales goals. And one of the
    areas that we missed was the possibility that customers could
    be charged fees in connection with accounts opened without
    their authorization. Because deposit accounts that are not used
    are automatically closed, we
    assumed this could not happen. We were wrong. And we took steps
    to refund fees that were charged and made changes so this could
    not happen again.
        In August 2015, we began working with a third-party
    consulting firm, PricewaterhouseCoopers (PwC), which conducted
    extensive, large-scale data analyses of all 82 million
    accounts, deposit accounts, and nearly 11 million credit card
    accounts that we had opened from 2011 through 2015. Of the 93
    million accounts reviewed, approximately 2 percent, 1.5 million
    deposit accounts and 565,000 consumers credit card accounts,
    were identified as accounts that may have been unauthorized.
        To be clear, PwC did not find these accounts had been
    unauthorized, but because it could not rule out the
    possibility, these accounts were further reviewed to determine
    if any fees had been charged.
        PwC calculated that approximately 115,000 of these accounts
    had incurred $2.6 million in fees, which had been refunded to
    those customers. Even one unauthorized account is one too many.
    This type of activity has no place in our culture.
        We are committed to getting it right 100 percent of the
    time, and when we fall short, we accept responsibility, and we
    will do everything we can to make it right by our customers.
        I will close by saying again I am deeply sorry that we have
    not lived up to our values in this way. I also want to take
    this opportunity to thank our 268,000 team members who come to
    work every day to serve our customers. Today I am making a
    personal commitment to rebuilding our customers' and investors'
    trust, the faith of our team members, and the confidence of the
    American people.
        I am happy now to address your questions. Thank you.
        Chairman Shelby. Thank you, Mr. Stumpf.
        Mr. Stumpf, according to your testimony, Wells Fargo began
    making internal changes in 2011 to address the opening of
    unauthorized accounts. Did these problems start in 2011? Or
    could there have been unauthorized activity before then? Why
    2011?
        Mr. Stumpf. Yes, I think we all know that not every team
    member will do everything right every day of every minute. And
    we do a lot of training of our team members, coaching. They
    each sign an annual ethics statement. And I cannot guarantee it
    did not happen before that time. We are trying to manage it
    within the business, and that is why I announced today that we
    are going back to 2010 and 2009, because at that time, as you
    might recall, we were putting the Wachovia and Wells Fargo
    teams together, and we just thought we do not want to leave any
    stone unturned.
        Chairman Shelby. Wells Fargo fired approximately 5,300
    employees in connection with these practices. What were the
    criteria for termination? And were any personnel actions taken
    short of termination? And if so, what were they? In other
    words, I am sure you did not fire everybody, but did you
    discipline some, and why, and so forth?
        Mr. Stumpf. Yes, so, Senator, thank you for that question,
    and it is a good one. We have a number of triangulations around
    how to understand when there might be improper behavior. If
    some customer, for example, all of a sudden shows up with three
    savings
    accounts, they probably do not need that. Or we have
    EthicsLines. We have a culture in the company, if you see
    something that you do not think is proper, raise your hand,
    talk to a manager.
        So we looked at a number of situations, and some of them
    were perfectly legitimate. But for those who broke our trust,
    were dishonest, put customers at risk, we do have a very bright
    line. And, after all, we are a regulated institution, and we
    have a fidelity bond, and people who behave in this way simply
    cannot work here.
        Chairman Shelby. Mr. Stumpf, your testimony also does not
    address when the violations were brought to the attention of
    senior management. Specifically, when did you find out that
    thousands of your employees were opening unauthorized accounts
    or fraudulent accounts? Did it take that long? When did you
    find out?
        Mr. Stumpf. Thank you again, Senator. The business has
    their own audit and investigations and sales practices,
    efficacy and so forth, contained within the regional bank or
    the retail bank. After they had been working on this issue for
    a couple of years--and, again, this was way too many people,
    but it was 1 percent of our people. There are at any one time
    100,000 team members in our banks, and after we noticed--after
    the business was dealing with this for a couple years, it was
    then brought to the holding company. And corporate assets,
    corporate audit, corporate compliance, the so-called second
    line of defense, got very active, and that is when I became
    much more aware of the issue.
        Chairman Shelby. Does it bother you as the CEO of such a
    large bank that systemic fraud was not brought to your
    attention sooner by your employees?
        Mr. Stumpf. If I could turn the clock back--and I have
    thought about this a thousand times--of course, I wish I would
    have done--we all wish we would have done something more,
    earlier. We did not get on this fast enough. Again, recognizing
    that this was, you know, the vast majority of people who are
    doing the right thing.
        Chairman Shelby. Let us go back to the question a minute
    ago. I do not believe you answered it specifically. When did
    the senior management--you and others you had deemed ``senior
    management''--learn about this fraud?
        Mr. Stumpf. I can speak for myself, and I know that other
    corporate executives at the corporate area outside of the
    business, I can speak to myself and I believe others, it was
    2013. Before that, it was being dealt with with the audit and
    compliance within the business unit.
        Chairman Shelby. Mr. Stumpf, the Board of Directors of
    Wells Fargo has awarded the then head of community banking,
    Carrie Tolstedt, millions of dollars--it could be $100 million,
    as Senator Brown says, or more--in incentive compensation for
    ``success in furthering the company's objective of cross-
    selling products'' and ``reinforcing a strong risk culture,''
    according to the 2015 proxy statement issued by your bank.
    Explain to the American public today here what accountability
    at a large bank looks like when an executive departs with
    millions of dollars in compensation after thousands of their
    employees defrauded customers? The question was raised by
    Senator Brown.
        Mr. Stumpf. I will try to get to all of those, and if I do
    not, please--but it is a good question. Carrie Tolstedt, as
    leader of the community banking business, had a lot of
    requirements and things that her performance was measured on,
    putting the Wachovia and Wells businesses together, doing
    common branding, making sure customers were treated properly.
    And throughout that entire period from 2011 until 2016,
    customer loyalty scores continued to improve. Today they are
    top of class, even by independent studies of large banks.
        Our team member engagement, we do a study every year--and
    today we have 15 people who are engaged in that business--for
    every one that is disengaged. Balances and customers had grown.
        Now, in this particular area, she did not do enough, and we
    decided--the chief operating officer, who she was reporting to
    at the time, with my consultation, decided that we would go in
    a different direction.
        But I also want to be clear: Carrie was eligible to retire.
    When she was told that we are going to go in a different
    direction, she chose to retire, and she got no retirement
    severance benefits, and her compensation that she received in
    the past, some of it which is not--which has been granted but
    not yet vested, and other compensation will be considered by
    the board of directors in an independent process that they
    have. And I will respect and accept whatever decision they
    make.
        Chairman Shelby. That would be clawback? You have the
    ability at the bank to claw back, do you not?
        Mr. Stumpf. You know, I am not an expert in compensation,
    but I will get you whatever----
        Chairman Shelby. You are the CEO of the company, right?
        Mr. Stumpf. I am the CEO----
        Chairman Shelby. And so are you the Chairman of the Board?
        Mr. Stumpf. I am the Chairman of the Board.
        Chairman Shelby. OK. Then----
        Mr. Stumpf. But I do not--excuse me.
        Chairman Shelby. And the buck stops here, so to speak.
        Mr. Stumpf. It stops--I am the senior officer.
        Chairman Shelby. So are you going to look into this
    seriously about what this person did, her responsibility, and
    the big reward that she is getting that happened under her
    watch?
        Mr. Stumpf. Senator, we will--the board of directors, the
    compensation committee--and they will refer it to the board. I
    am not part of that process. I want to make sure that--that is
    a very independent process and nothing that I say would
    prejudice their deliberative process. But that is their
    decision, and they have all the tools available to them,
    whether she would have retired or she would have been fired.
        Chairman Shelby. Mr. Stumpf, is not a lot of banking based
    on integrity or trust by your customers in the bank itself?
    They do business with you. They put their money there. They
    trust you. What has happened to the banking system? Not
    everywhere, but what has happened to the banking system?
        Mr. Stumpf. You know, Senator, you think about it exactly
    the way I think about it. Trust is the core element of any
    relationship, and surely in the financial services business.
    And we know we have work to do in that area, and I intend to do
    all I can to help in that area.
        Chairman Shelby. Do you believe you have violated that
    trust?
        Mr. Stumpf. There is no question with some of our customers
    we have violated trust, and we have to work hard to re-earn
    that.
        Chairman Shelby. Senator Brown.
        Senator Brown. Thank you, Mr. Chairman.
        Mr. Stumpf, I will make my questions short and ask you to
    be as concise as possible. I will start with your response to
    Senator Shelby. You became aware of the widespread fraud in
    2013. Could you be more precise than that? When in 2013?
        Mr. Stumpf. Well, I became aware that the problems the
    local business was working on in rooting out this behavior by 1
    percent of our team members, give or take--and I do not want to
    minimize that--that we were not making enough progress.
        Senator Brown. And when did you become aware more
    precisely?
        Mr. Stumpf. It was later in----
        Senator Brown. Was it the Los Angeles Times article that
    you became----
        Mr. Stumpf. Yes. It was later in 2013. Well, I had--
    actually, I do not remember the exact timeframe. I can get back
    to you and staff, but it was sometime in 2013.
        Senator Brown. OK. Thank you for that.
        You mentioned the Wachovia merger, that you are willing to
    go back before 2011, to 2009 and 2010, in part because of the
    Wachovia merger. The emphasis on cross-selling dates back at
    least to the Norwest merger, right? I mean, this has been a
    Wells Fargo business plan for a number of years. What year was
    the Norwest merger?
        Mr. Stumpf. It was two thousand--well, it was announced--
    you are talking about----
        Senator Brown. The Norwest merger with Wells.
        Mr. Stumpf. That was 1998.
        Senator Brown. And so this Wachovia merger, there clearly
    was--you are going back to 2009 and 2010. You are offering to
    do that. Why stop at 2009? We hear from people that it has gone
    on longer than that, with the cross-selling and the pressure
    and the sales goals. Why are you only willing to go to 2009?
        Mr. Stumpf. Well, Senator, I would tell you this: We want
    to make it right by any customer, and we already--we agreed
    with our regulators in our agreements to go back to 2011. We
    made a decision to go back to 2010 and 2009, and we want to
    make it right by any customer.
        Senator Brown. Does that mean you are willing to go back
    earlier than 2009?
        Mr. Stumpf. Well, I do not--I cannot tell you that today. I
    would have to talk to our folks. I do not know about records
    and so forth. But I want to make sure any customer who has had
    harm of any kind, that we will do right by them.
        Senator Brown. Well, you have records before 2009. Is that
    a pledge from you to go back earlier than that if, in fact,
    there are customers that were harmed by unauthorized accounts?
        Mr. Stumpf. Senator, I will take that under advisement, and
    I will get back to you----
        Senator Brown. And I accept your good intentions that you
    are going back to 2009 to give restitution to those--can
    provide restitution to those customers. But why stop there if
    you know that--you say you have to go back and talk to staff. I
    mean, if you really do want to make sure these customers are
    made whole, you should go back as long as you possibly can.
        Mr. Stumpf. And, Senator, again, I think that is--you know,
    we will consider that. I am--we will take that under
    advisement, and I will get back----
        Senator Brown. Well, I hope you will more than consider it.
    Thank you.
        Talk about Chairman Shelby's discussion on the clawback.
    Understanding I think you minimize your influence--to us at
    least you minimize your influence with the board. You are the
    chairman of the board. I understand that the board goes through
    a process, and I respect that. But you as the chairman, are you
    going to recommend to the Board--well, let me back up. You, I
    would assume, are more familiar with both the pros and the cons
    of performance from Ms. Tolstedt. You are aware that she is
    getting--she is slated to get, some news reports say, up to
    $120 million. You are also aware that most of the 5,300 people,
    team members that were fired, were low-income workers, as low
    as $11-something an hour, maybe up to $16 or $17 an hour, but
    were generally low-income workers, low-paid workers. So you are
    more familiar with that than probably any board member, at
    least as familiar. So will you with your knowledge and your
    stature and your position in the board make a recommendation to
    this board that they should claw back a significant amount of
    her compensation?
        Mr. Stumpf. Senator, I will answer that question, but I
    just want to put something in perspective. The lowest-paid
    worker we have, our entry level in our least-cost area is $12
    an hour. Our lowest-paid worker in our high-cost area is $16.50
    an hour. In addition to that, about $6 per hour is also--that
    does not include the benefits around health care, which we pay
    virtually all of it for low-paid people. But most of the people
    who lost their jobs because they violated our code of ethics,
    they were dishonest, were not--those were good-paying jobs.
    People lost their jobs who were bankers, bank managers,
    managers of managers, and even an area president. These were
    good-paying jobs, jobs that were--the averages I think were in
    the, you know, $35,000 to $60,000 area, if you just want to
    take an average.
        But with respect to your question specifically, I am not on
    the human resources and compensation committee. That is an
    independent committee. And they will take that under their
    deliberation. I do not want in any way to prejudice their
    activity, and I am going to accept and respect any decision
    that they make on
    anything.
        Senator Brown. Thank you for saying that. So you are not
    willing to make a recommendation based on how this looks to the
    public that--call them ``good-paying jobs'' at $16 or $17 an
    hour or not, compared to what, but I will put that aside. But
    whatever these workers were making, they were in the bottom
    some percentage of the workforce, whatever. They made mistakes,
    they were dishonest, they apparently deserved to be fired. I
    will not dispute that.
        You are not willing, as the CEO of this bank, to make a
    public recommendation that you think--to make a public
    statement that you think that Carrie Tolstedt did--you are not
    willing to say publicly to this Committee or to anyone that
    some of her compensation, over $100 million when she announced
    her retirement in the last several weeks, that any of it should
    be clawed back?
        Mr. Stumpf. I am going to let the process proceed, and the
    board has already met, and I made an affirmative comment in my
    testimony.
        Senator Brown. OK. That is unfortunate.
        You said in your testimony that in August 2015, your words,
    ``we began working with . . . PwC'' to locate reimbursed
    customers who incurred fees. Was that your decision? Or were
    you directed to do so by the regulators?
        Mr. Stumpf. That was in consultation with regulators and
    with the City Attorney's Office.
        Senator Brown. So you did not on your own, after finding
    out in late 2013 of these problems, through the rest of 2013, a
    month, 2 to 3 months in 2013, through all of 2014, and then
    into the first 7 months of 2015, it never occurred to you that
    you should bring in somebody, without the regulators suggesting
    it or pushing or in consultation, it never occurred to you to
    bring in somebody to really find out who was hurt, what kinds
    of issues were going on? How do we find these customers to
    reimburse them?
        Mr. Stumpf. Senator, that is a good question, and I have
    thought about that, a lot about why, and it was--it was early
    in 2015, about the time that we were considering or talked
    about who we would bring in, that we finally connected a dot.
    And there is no excuse why we did not connect it before.
        Generally what happens when an account is opened that is
    not funded, the system eliminates it within a couple of months.
    If it does not get funded, it is not used, it is not started,
    it is truncated or closed. It never dawned on us--and, again,
    no excuses, and we were wrong. It never dawned that there could
    be a cycle where--a cycle, a 30-day cycle would have turned--
    would have been completed, and there could have been a fee
    associated with that. It was the first time that light bulb
    went on.
        Senator Brown. I appreciate your candor about this, but in
    2011, 1,000 employees were fired; in 2012, a similar number;
    2013 was the peak number. In 2013 was the Los Angeles Times
    article. In 2015, throughout the year, nothing happened. It
    seemed to never occur to management to do any of this when it
    is just--and then today--and I do not question your integrity,
    but then today you come in and make all these announcements. It
    has been 5 years since--at least 5 years since all of this has
    been happening. Today you make announcements that you are
    doing--you apologize. We appreciate that. You make
    announcements you are doing the right things. We appreciate
    that. But it just sort of begs the issue of where was
    management when these so many thousands of people were fired,
    stories were written, regulators were starting to come in. I
    understand this is a huge profit center for Wells, the retail
    banking, writ large, in terms of the unauthorized accounts and
    everything else. But it just does not seem quite right that it
    did not occur to anybody on the board apparently--or at least
    that had your ear, did not occur to the CEO, did not occur to
    top management that they should do something more affirmatively
    until that August 2015 date when the regulators sort of helped
    you suggest and come to that conclusion.
        Thank you, Mr. Chairman.
        Chairman Shelby. Senator Corker.
        Senator Corker. Thank you, Mr. Chairman. Mr. Stumpf, thank
    you for being here.
        Just as an observation, I know that you have a whole host
    of people here with you, and I am sure one of those people is a
    communications person. I would just make the observation, look,
    I know you talk daily with board members, and, you know, I have
    been on boards before myself. I would suggest, just again as an
    observation, that to not invoke some degree of clawback for
    yourself and others involved would be committing malpractice
    from the standpoint of just public relations. So at a minimum,
    I am sure that is going to take place. I would be surprised if
    it does not.
        You found out about this through reading the Los Angeles
    Times. Is that correct?
        Mr. Stumpf. No, I do not recall back in 2013 exactly the
    timeframe, but I learned about it later in 2013. Remember,
    the----
        Senator Corker. But it sounds like it really was brought to
    your attention after a story in a newspaper, or that is when
    the focus really began. I am not criticizing that. I am just
    asking.
        Mr. Stumpf. No, and I--the only thing I want to make clear,
    Senator Corker, is that we had dismissed a number of people,
    and that is what caused the Los Angeles Times----
        Senator Corker. The story, I see.
        Mr. Stumpf. Yes, because----
        Senator Corker. So you all had taken some actions, they
    wrote a story, and it----
        Mr. Stumpf. Exactly, yes.
        Senator Corker. Your board, you know, I know public boards
    today, you know, intense scrutiny, there are all kinds of
    committees that are set up. When did the board realize that you
    had a unit that was committing fraud? It seems to me that that
    is one of those things you flag pretty quickly, or at least a
    committee of the board?
        Mr. Stumpf. Yes, and I just want to say these team
    members--you are absolutely right--they did not do what was
    right. It was----
        Senator Corker. I did not ask that. I am asking you----
        Mr. Stumpf. OK. It----
        Senator Corker.----when the board became aware that you had
    a unit that was involved in committing fraud.
        Mr. Stumpf. Yes, it would have been later 2013 and then
    2014 and on.
        Senator Corker. So they were not even aware of the Los
    Angeles Times story?
        Mr. Stumpf. I think that was later in 2013. I would have to
    go back and check my records, and it is the best to what I
    remember, but it was sometime, you know, later 2013, surely in
    2014.
        Senator Corker. I read a story about Ms. Tolstedt today. I
    do not know her. It actually, you know, sounds like she was an
    incredibly hard worker, got to work early, rode a bus, you
    know, micromanaged, signed leases herself. I do not know if any
    of this was true. But when you have somebody that is that
    involved in sort of micro details, is this a case of not
    raising their head up to 5,000 or 10,000 feet and understanding
    the kind of culture that was being created by slogans like
    ``Eight is great'' and those kinds of things? I mean, it is
    just hard to--you know, it seems to me that within a bank, with
    all the data you use to contact customers--I mean, you can--
    with algorithms, I mean, you guys can pick this stuff up so
    quickly. It is hard to believe that there is not some report
    within the bank that would cause this to jump out at people and
    say something really bad is happening here.
        Mr. Stumpf. Yes, Senator Corker, I think that is--that is a
    good question, and in the retail business, where you have
    100,000 people in seats at any one time in our 6,200 branches,
    there is a lot of turnover. And I am not justifying in----
        Senator Corker. Well, no, no. There is an officer, there is
    a compliance officer.
        Mr. Stumpf. Absolutely.
        Senator Corker. And all banks have these.
        Mr. Stumpf. Sure.
        Senator Corker. I mean, you are all regulated to death, and
    that is their job. And this kind of--this is something that you
    would think would be flagged and jump out at someone who was in
    that job.
        Mr. Stumpf. Thank you, and that is what I was trying to
    explain, that in her business, surely she was, I believe, in
    reporting situations where there was ethical breakdowns, and--
    --
        Senator Corker. But not to the board.
        Mr. Stumpf. And it got to the board level--it got to the
    corporate level in 2013 because progress was not being made,
    and the board level in 2014, as the corporate researchers
    started to--and we had been actually seeing improvement since
    that time, but not enough.
        Senator Corker. It does seem like there was--just in
    fairness, again, there does seem like a big disconnect there.
        So she left after 27 years, and I think it would be good
    for the audience at some point--not during my time--to explain
    the entire compensation. I think it is a little different than
    most people think based on some of the comments that have been
    made. But I assume her departure, after 27 years, was based on
    this issue. Is that correct?
        Mr. Stumpf. It was based on a number of issues. This was
    one of them. We wanted to take the business in a different
    direction, and we----
        Senator Corker. But she in essence was terminated over this
    issue.
        Mr. Stumpf. No. Carrie chose to retire. Tim Sloan, our
    Chief Operating Officer, with my consultation, had a discussion
    with her--I think it was sometime in June or July--and said,
    ``We want to go in a different direction. We want to put an
    end''--``we want to put more focus on this issue.'' But it was
    a variety of things. And she was eligible for retirement, and
    she decided to retire.
        Senator Corker. Well, my time is up, and out of respect for
    other Members, I will stop. I have a number of other questions.
    We thank you for being here.
        Mr. Stumpf. Thank you.
        Chairman Shelby. Senator Reed.
        Senator Reed. Well, thank you very much, Mr. Chairman, and
    thank you, Mr. Stumpf, for being here.
        Let me try to clarify a bit more your position going
    forward with respect to the issues of compensation, not just
    Ms. Tolstedt's but even your own compensation. Will you
    formally recuse yourself from board deliberations?
        Mr. Stumpf. Well, I am not even--I am not even involved in
    board discussions around what the HRC does with anything with
    respect to me and/or as they recommend to the board. So there
    is no recusal required. But if--but I am happy to do that. But
    I am not even involved in that.
        Senator Reed. It will ultimately come up, though, to the
    board for a vote of affirmation of the compensation committee,
    correct?
        Mr. Stumpf. It would, and I am not part of that. That is
    done in an executive session without me. It has always been
    done that way.
        Senator Reed. In 2013, when you learned of this, what did
    you do? This has been asked several different ways. Did you
    inform the regulators or instruct someone to inform the
    regulators of a growing problem?
        Mr. Stumpf. Thank you, Mr. Reed. Yes, and I should have
    mentioned that earlier, but yes. Our primary prudential
    regulator was informed at that time.
        Senator Reed. Did you inform the board at that time?
        Mr. Stumpf. Yes. I cannot recall the exact meeting, and--
    but I can--I can--it was sometime in 2013, and I know in 2014
    various committees of the board were made aware of this--the
    risk committee, the audit and examination, the corporate
    responsibility.
        Senator Reed. Did you take any steps to internally notify
    your employees of this type of behavior, which, going back,
    was, you know, in 2011, a thousand people had done, 2012, 2013,
    including an area manager? Did you communicate that? Or did you
    simply keep these discussions internal to the board?
        Mr. Stumpf. I do a team member townhall every quarter where
    I go to one of our various cities, and there will be a couple
    thousand people in the audience, and then we Web cast that
    broadly across our company. And I, you know, typically talk
    about ethics and doing what is right for customers, and in the
    case the vast majority do it, but I was trying to really bring
    home this fact.
        Senator Reed. But given specific evidence of techniques
    used to essentially, in the words of some of my colleagues,
    ``defraud
    customers,'' those specific practices were not focused upon and
    made very clear that they were not tolerated? Or was it--it
    would seem to be a generic discussion of follow the rules?
        Mr. Stumpf. Again, Senator Reed, at the time that the
    escalation happened in 2013, there were many different meetings
    and things happening, as I mentioned in my written--or my oral
    testimony, about reducing goals, talking about sales efficacy,
    having manager meetings, talking with leaders, putting more
    controls in place. And, again, not fast enough, not far enough,
    and I apologize for that.
        Senator Reed. Well, it seems that, you know--and I would
    suspect, looking back, that the emphasis on meeting sales
    objectives, cross-selling, was unremitting. And yet you had
    examples here, specific examples of things that you knew were
    happening and should not be happening. And yet what I am
    hearing is more or less a generic, ``Make those sales, oh, and
    by the way, you know, we have these ethical rules in place,
    too.'' Again, you know, I think you have said it and it is
    obvious that the tone, emphasis, what the leader does, what the
    leader says, is sometimes more important than anything else.
    For a period there, this was recognized, but there was no
    specific, ``Stop this stuff.''
        Mr. Stumpf. Well, I can tell you we said, ``Stop this
    stuff,'' and the thing about cross-sell is I would rather have
    a customer with two products that they use and they need and
    they want and they value than four products that are not used
    and valued. In the first case, the customer wins, we win, we
    all do well. In the second case, everybody loses. We lose
    money. It does not help us.
        So we have been--we tried very hard, and, again, we were
    not as effective as we could have been in talking about--you
    know, the goal here is not, you know, products. The goal here
    is deep relationships. We had the wrong tool for too long to
    make that happen.
        Senator Reed. I would simply conclude that it just seems
    that it took too many months--years, literally--for some simple
    steps which should have been taken to be taken, and it was
    only, I think, as a result of what ultimately Los Angeles
    County and the regulators and others did that forced the issue.
    Thank you, Mr. Stumpf.
        Thank you, Mr. Chairman.
        Chairman Shelby. Senator Toomey.
        Senator Toomey. Thank you, Mr. Chairman. Thanks for calling
    this hearing. I have to say what we have been learning is so
    deeply disturbing on so many levels.
        First, we discover that Wells Fargo had a sales culture
    that was blatantly antithetical to what is best for customers.
    We discover that management had far too few common-sense
    controls in place to prevent the kind of abuse that customers
    were subject to. We discover Wells Fargo executives completely
    out of touch.
        In a 2011 Forbes article, Wells Fargo was rated the best at
    cross-selling its products. The only problem is we discovered
    Wells Fargo was not always cross-selling. Signing up customers
    for products when you know the customer does not want the
    product, failing to notify customers about these sham accounts
    opened, and this is not cross-selling. This is fraud. That is
    what this is.
        And then we discover way too little done to prevent it from
    continuing, even after it was discovered. So Wells Fargo
    employees continued for years to literally forge customers'
    signatures--including my constituents'--on documents to open up
    accounts.
        And then the case of Carrie Tolstedt, my understanding is
    that something on the order of over $20 million in bonuses for
    her between 2010 and 2015 were awarded because of strong cross-
    sell
    ratios. Yet we know in some cases she was hitting numbers by
    these fraudulent accounts. So this is unbelievable.
        Let me begin, Mr. Stumpf. Do you acknowledge that the
    employees who engaged in this activity were committing fraud?
        Mr. Stumpf. You know, I am not a criminal, you know, law
    enforcement officer, and I do not know the--I am not a lawyer.
    I do not know the legal term. I know this: They broke our code
    of ethics, they were dishonest, and we did everything we can to
    support law enforcement on these issues.
        Senator Toomey. So I am not a lawyer either. Neither are
    most adults in America. But I think most people understand the
    meaning of the word ``fraud.'' Black's Law Dictionary does
    provide a useful definition. It says, ``Fraud is a knowing
    misrepresentation or knowing concealment of a material fact
    made to induce another to act to his or her detriment.''
        How does falsely signing a customer up for an account they
    do not want, how does it not meet that definition?
        Mr. Stumpf. Well, and, again, I--if that is the definition
    that--you know, I can tell you this: It is absolutely wrong. We
    found this out. We got rid of those people. And they have no
    place--that behavior has no place in our culture. If that means
    fraud, that means fraud.
        Senator Toomey. At what point did you alert your regulators
    and law enforcement that you had probable criminal activity
    happening on a large scale?
        Mr. Stumpf. Well, again, it was 1 percent of our people,
    Senator, and I know that----
        Senator Toomey. But 5,000 is a big number.
        Mr. Stumpf. It is bigger than my hometown. I do know that.
    And it was--but we also had the vast majority who did the right
    thing. But let us talk about those. Every time--and we made a
    very bright line. If it happened one time, it was one time too
    many.
        Senator Toomey. I have only 5 minutes here.
        Mr. Stumpf. And to answer your question--I am sorry--we
    sent it--we did everything we needed to do.
        Senator Toomey. Did you refer it to law enforcement?
        Mr. Stumpf. When it was--when it was required, we did. We
    did everything according to the rules.
        Senator Toomey. When did you begin to disclose in SEC
    filings that you had this potentially material adverse set of
    circumstances that could certainly have huge damage to your
    reputational value?
        Mr. Stumpf. Well, I do not--I do not--I cannot answer that.
    I would have to get to our legal team. I do not have that in
    front of me. But this was not a--I just--I would have to get
    back to you on that. I do not know.
        Senator Toomey. Well, we have not been able to discover
    such a disclosure, and the SEC very clearly requires disclosure
    of material adverse circumstances. And I do not know how this
    could not be deemed ``material.'' I think the market cap lost 9
    percent over the last couple of weeks. That is pretty material.
        Mr. Stumpf. Well, from a financial perspective, you know,
    $2.6 million--and it is $2.6 million too much, and $185 million
    was not deemed ``material.''
        Senator Toomey. I get that those dollar amounts may not
    qualify as ``material'' to a bank the size of Wells Fargo, but
    the reputational damage done to the bank clearly is material,
    and that has been manifested by this huge adverse movement in
    stock prices.
        Let me raise one other issue. You mentioned in your
    testimony and you state unequivocally that there was ``no
    orchestrated effort, or ``scheme'' as some have called it, by
    the company.'' But when thousands of people conduct the same
    kind of fraudulent activity, it is a stretch to believe that
    every one of them independently conjured up this idea of how
    they would commit this fraud. Is it not very probable that
    there was some orchestration that happened at some level, if
    not--I am not suggesting it was you personally by any means,
    but does it not defy common sense to think that there was not
    some orchestration of this?
        Mr. Stumpf. Senator, I do not know how--what motivated or
    why people did this, but we did fire managers and managers of
    managers, and in one case, an area president. So, again, you
    know, this 1 percent is way too many. I do not want to minimize
    it. But I also want to make sure that we recognize that the
    vast majority of the people did exactly the things we wanted
    them to do to help deepen customer relationships, help them
    succeed financially. And, also, we have put a number of other
    controls in place besides taking sales goals off the table. We
    now have--we do not open any deposit account today or any
    credit card without a signature. Well, there are a couple cases
    where ADA where they cannot--we will have a dual notice. We are
    also doing mystery shopping, and we are also giving customers a
    1-hour notice by email or, if they do not have an email, by
    letter to make sure that we know exactly and they know exactly
    what they have opened.
        Senator Toomey. It seems like it took an awfully long time
    to impose those sort of basic controls.
        I see I am out of time. Thank you, Mr. Chairman.
        Chairman Shelby. Senator Menendez.
        Senator Menendez. Thank you, Mr. Chairman. First of all,
    thanks for the response--I know you were already on the way,
    but to the letter that we sent asking you for this hearing, so
    I appreciate you holding it.
        Mr. Stumpf, let me just say I am personally appalled by the
    size, the scope, the duration, and the impact of the scandal.
    And I must say that I am shocked and incredibly disappointed by
    the response of Wells Fargo's corporate executives. In the last
    week, you and your chief financial officer have taken to the
    press and laid the blame squarely on low-paid retail bank
    employees. And while I do not excuse what they did by any
    stretch of the imagination, I find that despicable.
        Wells Fargo touts to its investors and its customers that
    we will never put the stagecoach before the horses. Well, I
    tell you what: The bank recklessly rolled over 2 million of
    your customers in what in no way can be viewed other than a
    large-scale scheme to boost, you know, your growth and whatever
    that meant for your shares and whatever that meant to your
    shareholders.
        So you did not fire 10 employees. Right? You did not fire
    500 employees. You fired 5,300 employees. Is that right?
        Mr. Stumpf. Yes, 5,300 people did not honor our culture.
        Senator Menendez. And they were not located in one branch
    or one district. Is that right?
        Mr. Stumpf. That is correct.
        Senator Menendez. They were located across the country. Is
    that fair to say?
        Mr. Stumpf. That is fair to say.
        Senator Menendez. Now, should not the workplace actions of
    employees reflect the values of the institution no matter what
    part of the country that they are in?
        Mr. Stumpf. I absolutely agree with that.
        Senator Menendez. So do you believe that senior executives
    like yourself are responsible for nurturing and honing a
    company-wide culture for your employees and your employees'
    actions?
        Mr. Stumpf. Absolutely.
        Senator Menendez. So this is not the work of 5,300 bad
    apples. This is the work and the result of sowing seeds that
    rotted the entire orchard. And whether tacitly through sales
    guides and employee training manuals, some of which I have
    reviewed, or more explicitly through demands from hard-driving
    managers, you and your senior executives created an environment
    in which this culture of deception and deceit thrived. And yet,
    you know, I see this as a toxic combination of low wages--now,
    I know that in response to Senator Brown's question of what
    does an average banker at Wells Fargo make, you said between
    $30,000 and $60,000. You said that is good money. How much
    money did you make last year?
        Mr. Stumpf. $19.3 million.
        Senator Menendez. Now, that is good money. Now, that is
    good money. Is it a combination of low wages, punishing sales
    quotas, and a grossly misaligned compensation incentive
    throughout the bank's organizational structure, as is evidenced
    that you removed it?
        Now, when you were holding these ethics sessions, did you
    ever specifically, seeing this information begin to blip up on
    your radar screen, and then more significantly, did you ever
    specifically say in those sessions, ``We do not want to open
    accounts for our customers that they do not ask for''? Did you
    specifically say that?
        Mr. Stumpf. Senator, I will get to that question, but I
    just want to go back for a second. When a team member opens an
    account that is not used, that does not help customers and it
    does not help us. And the vast majority did the absolutely
    right thing.
        Senator Menendez. Did you specifically say----
        Mr. Stumpf. And I specifically said, yes, we do not push
    products. We sit down with a customer. We have a needs-based
    analysis, and then based on what we hear where the customer is
    in their financial journey, we match products.
        Senator Menendez. Did you specifically say that, in fact,
    ``I do not want to see accounts open for customers that they
    did not ask for''?
        Mr. Stumpf. Absolutely.
        Senator Menendez. When did you say that?
        Mr. Stumpf. I have said that many times in many townhalls.
        Senator Menendez. Let me ask you, Ms. Tolstedt made about
    $9 million in salary last year, did she not?
        Mr. Stumpf. You know, it is in the--it is in our public
    filings.
        Senator Menendez. She made about $9.1 million in salary,
    bonus, and stock awards. According to Glassdoor, the average
    Wells Fargo bank teller salary is $24,545, and the average
    salary for a Wells Fargo personal banker is $37,560. So
    imagine--do you know what the poverty wage is for a family of
    three?
        Mr. Stumpf. I do not have that in front of me.
        Senator Menendez. Well, let me just share it with you. I
    did not think you would. It is $24,300. For a family of three,
    it is $20,160. So imagine for a moment you are a single parent
    working with two young children as a personal banker in Wells
    Fargo's branch. Let us say your base salary is somewhere in the
    $30,000 range. You have a hard-driving boss breathing down your
    neck to meet rigorous sales quotas. You have got to call into a
    call center when you do not meet those quotas. And if you do
    not meet the quota one day, it gets carried over to the next
    day, so you have got even a higher quota. And you are being
    told--forget about the incentive of making more money. In
    essence, this is about losing your job. And you think that that
    environment was the appropriate environment to protect your
    customers and to have the culture that you portray here that
    Wells Fargo had?
        Mr. Stumpf. Senator Menendez, I get your question. We had
    been reducing sales goals and bringing other goals into place
    even before we decided to get rid of the sales product goals.
    And the vast majority--the vast majority of employees--love
    Wells Fargo and, in fact, when we go to our regional banking--
    our retail banking people, 15 of our people in survey--it is
    actually a census done by Gallup--every year love the
    environment in Wells Fargo, and they put customers first. I
    cannot excuse the behavior of the 1,000. I know it is too many.
    But the culture is a very caring and collaborative culture.
        Senator Menendez. I know my time is up, but let me just ask
    you a final question before hopefully the Chairman will have a
    second round. Did you or any senior executive at Wells Fargo
    suffer any
    financial consequence as a result of what has transpired over
    the years?
        Mr. Stumpf. The board will take--well, first of all----
        Senator Menendez. To date. To date, have you suffered any
    financial consequences?
        Mr. Stumpf. The board has gone through, and, yes, people
    have been held accountable.
        Senator Menendez. Senior executive management?
        Mr. Stumpf. Senior executive----
        Senator Menendez. I would like for you to classify for me
    what that is.
        Mr. Stumpf. OK. Well, people that are in charge of risk in
    the retail bank, people that are in charge of sales efficacy,
    regional presidents who do not meet their goals around proper
    sales, yes, people are held accountable, and they will be held
    accountable.
        Chairman Shelby. Senator Heller.
        Senator Heller. Mr. Chairman, thank you for holding this
    hearing and for our witness for being here today. I appreciate
    it.
        For years, the people of Nevada have struggled to regain
    what they lost in the aftermath of the housing crisis, and we
    all know that this housing crisis was caused by greed and
    excess. And for too long, Nevada often has had the unfortunate
    distinction of having one of the highest rates of unemployment,
    foreclosures, underwater homes, homes sold in short sales, and
    personal bankruptcies. So trust to some is the center point of
    any relationship with a business, and I assume it is the same
    that Wells Fargo has broken that trust.
        I consistently fight to ensure Nevadans retain the
    protections of their personal privacy, so I was shocked to hear
    the reports, Mr. Chairman, that the employees of Wells Fargo
    opened millions of bank accounts and credit cards without
    customers' consent. The actions of some Wells Fargo employees
    directly took money from Americans' pockets in order to
    artificially inflate company quotas.
        I had a constituent--and I have had a number of
    constituents call my office. This one happened to be from
    Henderson, Nevada, emailed me, and said she was affected by
    Wells Fargo's tactics. She said she was insulted that
    leadership at Wells Fargo was unaware of these policies.
        Now, given the culture of wrongdoing that some of your
    employees exhibited, taking responsibility, refunding
    customers, and conducting internal investigations should only
    be the first step as we plan to fix this mess. Accountability
    and reform in putting your customers' interests first should be
    Wells Fargo's top priority. And so with that, Mr. Stumpf, just
    a couple of questions.
        Do my constituents have a right to be insulted? I have
    heard a number of comments probably more directed at you that
    you would take the Sergeant Schultz position that you knew
    nothing as this was moving ahead, that perhaps you even took--
    and I heard this from one of my constituents--the Hillary
    Clinton approach, a ``what difference does it make?'' attitude.
    And let me tell you why they are talking this way. I have got
    your letter to your valued customers as you tried to explain to
    them some of the problems: ``You may have seen news recently
    that some Wells Fargo customers received products and services
    that they did not need.''
        You did not tell them you were sorry in your customer
    service letter. You came to this Committee and told us you were
    sorry, but you did not tell your customers you were sorry. Do
    they have a right to be insulted?
        Mr. Stumpf. Well, first of all, let me tell you, every--I
    had a number of media contacts last week, one broadcast and
    four in print, and I am sorry. I am accountable when we do not
    do it right 100 percent of the time. And I was even--I was, I
    think, misquoted or misunderstood in one where I blamed team
    members. I do not like--we do not accept behavior that is not
    consistent with our culture, but I do accept responsibility,
    and I am sorry.
        Senator Heller. This letter appears that you are
    downplaying some of the concerns. You said that some Wells
    Fargo customers--you know, we are talking almost 2 million
    accounts that were opened up.
        Let me ask you this question: Was anybody on your board or
    yourself--did any of you have any open unauthorized accounts in
    your names?
        Mr. Stumpf. I do not know that. I have not seen a letter,
    you know, on mine, and I was not refunded any of the dollars.
        Senator Heller. What would you have done if you had an
    unauthorized account where somebody forged your own name? What
    would you have done about that?
        Mr. Stumpf. Well, I have had that before where people have
    forged my name----
        Senator Heller. Your bank.
        Mr. Stumpf.----or stolen my identity. But, of course, I
    would be--I would be very disappointed, and I can surely
    understand your constituents' disappointment, and we have a lot
    of work. Nevada is a wonderful, important State to us. We have
    been there a long time. And I apologize to all of the American
    people and our customers, and we will make it right.
        Senator Heller. Can I go back to Carrie Tolstedt for a
    moment? You said you are not on the compensation board, but if
    the compensation board were to send you a recommendation to
    approve $100 million as a compensation package for her, would
    you support that?
        Mr. Stumpf. You know, I am not on that board, and I think
    it is probably maybe--if I could just take a second, as I
    understand--and I will get you the information about her $100
    million--part of it is stock she has either purchased on the
    open market or exercised and owns for a 27-year career. There
    are some dollars that are in the money, options that she has
    not yet exercised. And then, finally, there is a part of future
    grants that will be vesting over the few number of years, and
    the board will consider all of those things. They will consider
    her entire situation in their deliberations.
        Senator Heller. Would you approve that?
        Mr. Stumpf. You know, again, Senator, I want to be
    respectful of the committee and respectful of their process and
    not in any way bias their decision.
        Senator Heller. Mr. Chairman, my time has run out. Thank
    you.
        Chairman Shelby. Senator Tester.
        Senator Tester. Thank you, Mr. Chairman, Ranking Member
    Brown, for having this hearing. I have been on this Committee
    for nearly 10 years now. You have done something that has never
    happened in the last 10 years and united this Committee on a
    major topic, and not in a good way.
        Credit card accounts were opened. Folks did not know about
    them. There were fees charged, potentially fines charged. And
    if customers were unaware that these accounts were opened up,
    there must have been many instances--there were 2 million
    accounts opened up--that negative information was sent to
    credit bureaus. Is that accurate?
        Mr. Stumpf. The part that is accurate is there are 565,000
    consumer credit cards that were opened up that were never
    activated. About 400,000 of those have customers' signatures on
    them, and 5.7 percent or less than 6 percent of those accounts
    that we opened during that time were not activated, which is a
    pretty standard industry--because people might have them--we
    are going to go back to each one of those customers now and
    find out if that was a legitimate--to ensure an open--and if it
    is not, we will make it right.
        Senator Tester. OK, but that is not what I asked.
        Mr. Stumpf. I am sorry.
        Senator Tester. I asked: Was negative information turned in
    to the credit bureaus because of these actions?
        Mr. Stumpf. You know, I do not know the algorithms of how
    credit bureaus----
        Senator Tester. Well, this----
        Mr. Stumpf. But I want to answer your question. I know that
    when a credit bureau is requested, it has an impact on your
    credit score.
        Senator Tester. Well, this is a big deal.
        Mr. Stumpf. Yes, it is.
        Senator Tester. And I am telling you, it is a big deal. I
    could ask you for the age breakdown on these 2 million accounts
    that were opened up, but I am telling you that if information
    was sent in to the credit bureaus because of these falsely
    opened accounts, the impacts on this are far, far, far more
    than the fees or fines that could be associated with that.
        What is Wells Fargo doing about that?
        Mr. Stumpf. Senator----
        Senator Tester. Or did that information not get reported to
    the credit bureaus?
        Mr. Stumpf. Well, when we pull a credit----
        Senator Tester. Just ask me--just tell me, did the
    information, if there were fees and fines involved and the
    credit bureaus requested it, or even if they did not, did that
    information get forwarded to the credit bureaus?
        Mr. Stumpf. I am trying--sir, I am trying to work with
    you----
        Senator Tester. But a ``yes'' or ``no'' works.
        Mr. Stumpf. Yes--yes, we--we pulled a credit bureau for
    each one of these cards.
        Senator Tester. OK. So what is Wells doing about fixing
    that problem? And be concise.
        Mr. Stumpf. OK. We are calling each credit card customer to
    find out if this truly was a card they wanted.
        Senator Tester. OK.
        Mr. Stumpf. If they want it, we do not want to take away
    their credit. If they did not want it, we are going to go back
    and make sure that it is made right by the credit bureau and
    made right by the customer.
        Senator Tester. And what is the timeframe for that?
        Mr. Stumpf. We already started that process.
        Senator Tester. OK. So now, this took 5 years. It has been
    documented, 2011--maybe even started before that, but 2011
    until fairly recently. Now, if I had had a credit card issued
    in the first volley and in the meantime between 2011 and now I
    decided to buy a house, and that information was reported to
    the credit bureau, it could make--you probably could know the
    figure, but maybe half a percent, maybe more than that. And on
    a $500,000 mortgage, the difference between 3.5 and 4 percent
    is 50 grand over 30 years. What is being done about that?
        Mr. Stumpf. We will look at each one of those and determine
    what----
        Senator Tester. So you are going to go back in and find
    out, even if they did not do business through Wells, if they
    bought a house and what Wells did impacted their credit rating,
    you are going to go back and find those folks?
        Mr. Stumpf. I am going to go back--we have committed to go
    back to all of our credit card customers and find out----
        Senator Tester. OK. What about the ones that got--you
    refund all their fines, you refund all their fees. You went
    back to the credit bureau and reestablished their credit rating
    as of today. What about the folks that may have bought a house
    through Chase and got a higher interest rate because of it? How
    are you going to find those folks?
        Mr. Stumpf. You know, we are working on that. I have told
    our people, ``Go back and make it right,'' and I can--as we
    start going through that, I am happy to have our team come back
    and report to you how we're working on it.
        Senator Tester. Well, I think it is really important that
    you understand that this is a big deal. I mean, it is a big
    deal. And I know you feel bad about it. We feel bad about it.
    But the truth is there are real-world implications here on
    young families and old families that are going to be put into a
    poverty situation because of this, even though we think it is
    just a few hundred bucks in fees. It is more than that, much
    more than that.
        So you found out in 2013--and I do not want to beat this
    horse anymore, but did you find out that they were actually
    setting up accounts with fraudulent signatures in 2013?
        Mr. Stumpf. You know, I learned that some of our team
    members were not doing the right thing, and they were opening
    accounts on customers, and then we truncated those.
        Senator Tester. Because it would seem to me that if you
    guys knew about that, a simple edict would have been pretty
    helpful: ``Do not do this. If you do this, you are gone.''
        Mr. Stumpf. And that is--we had even more than that, and
    what we should have done is get rid of our incentive program.
        Senator Tester. The last thing, and this is just a
    statement. But I can tell you that you have said multiple times
    here that 5,300 people went, and that is basically 1 percent of
    your workforce. Every time you say that, you give ammunition to
    the folk who want to break up the big banks. Fifty-three
    hundred people are more people than live in most towns in
    Montana. Two million people is twice the population of the
    entire State. This is a major screw-up that went on for far,
    far, far, far too long, and I think you know that. But, man,
    there is going to be a lot of work that has to be done to
    rectify this situation, if it ever can be rectified.
        Thank you, Mr. Chairman.
        Chairman Shelby. Senator Crapo.
        Senator Crapo. Thank you, Mr. Chairman.
        Mr. Stumpf, I want to follow up on the line of questioning
    that Senator Tester was just discussing with you, but first I
    want to ask a couple of questions about just data, basically.
        Consumers expect that their private information is going to
    be protected at their bank and not used to open an unauthorized
    account. You have gone through that extensively today. Did the
    third-party analysis that you engaged in determine if these
    unauthorized accounts were created uniformly across the United
    States? Or were there areas in the United States where they
    were more heavily created?
        Mr. Stumpf. Yes, there was a heavy bias toward the
    Southwestern part of the country.
        Senator Crapo. The information I have indicates that that
    even more specifically includes California and Arizona. Would
    that be correct?
        Mr. Stumpf. That would be correct.
        Senator Crapo. I also have New Jersey here on my list. Was
    New Jersey more heavily impacted?
        Mr. Stumpf. Well, I have numbers by State, and it typically
    related to there was some over index or over--people did more
    wrong things, but more associated with the size of the business
    we're a much larger bank in Southern California and Arizona,
    New Jersey. There were places where we are larger and it fit
    more the pattern of the size of our organization in those
    communities.
        Senator Crapo. So because of that, it was not necessarily
    that the management in those communities were potentially the
    ones who were driving this more aggressively, but simply the
    size of your business in those communities?
        Mr. Stumpf. Senator, it was a bit of both.
        Senator Crapo. All right. Thank you. Obviously, one of the
    questions that my constituents and constituents across the
    country have is, ``Am I one of those who has had an
    unauthorized account created in my name?'' And you have
    indicated that right now Wells Fargo is calling every customer.
    Is that correct?
        Mr. Stumpf. We are contacting all of our deposit customers
    and the credit--and, incidentally, virtually all of these
    accounts came on the books and were closed within a 60-day
    period. And so of the potential--again, the 2 million accounts
    that could not be eliminated--and I think I said that in my
    oral testimony. So I do not know--you know, we just could not
    eliminate them, or PwC could not. But we are calling all of our
    credit card customers and contacting all of our deposit
    customers, and we have a special call a number. We are asking
    people to come into our banks and talk to our people.
        Senator Crapo. That was my next question. If there is
    somebody who does not want to wait for the call, what can they
    do?
        Mr. Stumpf. I mean, they are going to get a notice and say,
    you know, if you have an interest, you can email us, we will
    call you, we will do whatever it takes to make sure that--and I
    know our study was--PwC was very comprehensive. We tried to err
    on the side of the customer. In fact, we are getting people
    coming into our bank today saying, ``I got a $25 check, but I
    wanted this service.'' And I am not saying that--but I am just
    saying that we want to make sure that we do not hurt any
    customer and that if they
    wanted credit, they have it; if they did not want it, we will
    try to make it right by them.
        Senator Crapo. All right. Now, getting back to Senator
    Tester's question about the credit impact, the simple opening
    of an account causes an impact to a credit rating, does it not?
        Mr. Stumpf. It does on--and, again, I am not an expert in
    this field, but I know on the credit card side we pull a
    bureau, and depending on how many bureau--well, I know that
    that is a strike against--it lowers your credit score,
    depending on how many
    requests are in that time. There is also a positive impact, and
    I am not here to justify or under--we will do what is right to
    make that right.
        Senator Crapo. Well, and that is what I wanted to get at
    finally in the last minute I have in my questioning. You said
    to Senator Tester and you have just said again to me that you
    are going to make it right. How do you do that? For example,
    you said the calls have been being made. I assume that in the
    calls that the bank is making that they are finding customers,
    some, who have unauthorized and unwanted credit card accounts.
    How do you make it right with regard to the impact that that--
    and potentially charges on that account have caused to the
    credit rating of that card holder?
        Mr. Stumpf. And, Senator, that is--that is a very good
    question. We are just starting that process. I do not have
    enough to give you right now, but we would be happy to come
    back to the Committee and tell you more about what we learn as
    we do that.
        Senator Crapo. All right. Thank you. In the little bit of
    time I have left, I want to shift topics. My understanding is
    that the primary regulators that you have been dealing with are
    the city of Los Angeles and the OCC and the CFPB. Is that
    correct?
        Mr. Stumpf. That is correct.
        Senator Crapo. Could you just give me a timeline? When did
    each of those notify you? Or did you notify them at some point?
    In what order did they get involved and when?
        Mr. Stumpf. I do not know that I have precise dates, but I
    will give you a general timeline. The city of LA lawsuit was
    sometime in the May timeframe of 2015--well, 2013, maybe it
    was. I am sorry I am missing on dates here. And then the OCC
    was involved. We shared with them. And when we learned of their
    lawsuit, we--well, it was actually in 2015. I am sorry, 2015.
    May of 2015. And then we shared that information with the CFPB.
    But the OCC was involved with us prior to probably the 2013
    timeframe.
        Senator Crapo. So the OCC probably would have been involved
    first, even before the city of Los Angeles?
        Mr. Stumpf. They are our principal regulator, and yes.
        Senator Crapo. All right. And then the CFPB would have been
    the final entity that was--the last----
        Mr. Stumpf. We noticed--we called them, someone from our
    legal department called them I believe in the May timeframe of
    2015.
        Senator Crapo. Sorry. I see my time is well over now. Thank
    you, Mr. Chairman.
        Chairman Shelby. Senator Warren.
        Senator Warren. Thank you, Mr. Chairman.
        Mr. Stumpf, the Wells Fargo Vision and Values Statement
    which you frequently cite says, ``We believe in values lived,
    not phrases memorized. If you want to find out how strong a
    company's ethics are, do not listen to what its people say.
    Watch what they do.''
        So let us do that. Since this massive, years-long scam came
    to light, you have said repeatedly, ``I am accountable.'' But
    what have you actually done to hold yourself accountable? Have
    you resigned as CEO or Chairman of Wells Fargo?
        Mr. Stumpf. The board--I serve at the----
        Senator Warren. Have you resigned?
        Mr. Stumpf. No, I have not.
        Senator Warren. All right. Have you returned one nickel of
    the millions of dollars that you were paid while this scam was
    going on?
        Mr. Stumpf. Well, first of all, this was by 1 percent of
    our people and----
        Senator Warren. That is not my question. My question--it is
    about responsibility. Have you returned one nickel of the
    millions of dollars that you were paid while this scam was
    going on?
        Mr. Stumpf. The board will take care of that.
        Senator Warren. Have you returned one nickel of the money
    you earned while this scam was going on?
        Mr. Stumpf. And the board will do----
        Senator Warren. I will take that as a ``no'' then.
        Have you fired a single senior executive? And by that, I do
    not mean a regional manager or branch manager. I am asking
    about the people who actually led your community banking
    division or your compliance division?
        Mr. Stumpf. We have made a change in our regional--to lead
    our regional bank.
        Senator Warren. I just said I am not asking about regional
    managers. I am not asking about branch managers. I am asking if
    you have fired senior management, the people who actually led
    community banking division, who oversaw this fraud, or the
    compliance division that was in charge of making sure that the
    bank complied with the law.
        Mr. Stumpf. Carrie Tolstedt----
        Senator Warren. Did you fire----
        Mr. Stumpf. No.
        Senator Warren.----any of those people?
        Mr. Stumpf. No.
        Senator Warren. No. OK. So you have not resigned. You have
    not returned a single nickel of your personal earnings. You
    have not fired a single senior executive. Instead, evidently
    your definition of ``accountable'' is to push the blame to your
    low-level employees who do not have the money for a fancy PR
    firm to defend themselves. It is gutless leadership.
        In your time as Chairman and CEO, Wells has been famous for
    cross-selling, which is pushing existing customers to open more
    accounts. Cross-selling is one of the main reasons that Wells
    has become the most valuable bank in the world. Wells measures
    cross-selling by the number of different accounts a customer
    has with Wells. Other big banks average fewer than three
    accounts per customer. But you set the target at eight
    accounts. Every customer of Wells should have eight accounts
    with the bank. And that is not because you ran the numbers and
    found that the average customer needed eight banking accounts.
    It is because ``eight rhymes with great.'' This was your
    rationale right there in your 2010 annual report.
        Cross-selling is not about helping customers get what they
    need. If it was, you would not have to squeeze your employees
    so hard to make it happen. No. Cross-selling is all about
    pumping up Wells' stock price, is it not?
        Mr. Stumpf. No. Cross-selling is shorthand for deepening
    relationships. We only do well----
        Senator Warren. Let me stop you right there. You say
    ``no''? Here are the transcripts of 12 quarterly earnings calls
    that you participated in from 2012 to 2014, the 3 full years in
    which we know this scam was going on. I would like to submit
    them for the record, if I may, Mr. Chair. [http://
    www.warren.senate.gov/wellsfargo/]
        Chairman Shelby. Without objection, so ordered.
        Senator Warren. Thank you.
        Senator Warren. These are calls where you personally made
    your pitch to investors and analysts about why Wells Fargo is a
    great investment, and in all 12 of these calls, you personally
    cited Wells Fargo's success at cross-selling retail accounts as
    one of the main reasons to buy more stock in the company. Let
    me read you a few quotes that you had.
        April 2012: ``We grew our retail banking cross-sell ratio
    to a record 5.98 products per household.''
        A year later, April 2013: ``We achieved record retail
    banking cross-sell of 6.1 products per household.''
        April 2014: ``We achieved record retail banking cross-sell
    of 6.17 products per household.''
        The ratio kept going up and up. And it did not matter
    whether customers used those accounts or not. And guess what?
    Wall Street loved it. Here is just a sample of the reports from
    top analysts in those years, all recommending that people buy
    Wells Fargo stock in part because of the strong cross-sell
    numbers. And I would like to submit them for the record.
        Chairman Shelby. Without objection, so ordered.
        Senator Warren. Thank you, Mr. Chair.
        Senator Warren. So when investors saw good cross-sell
    numbers--they did while this scam was going on--that was very
    good for you personally, was it not, Mr. Stumpf? Do you know
    how much money, how much value your stock holdings in Wells
    Fargo gained while this scam was underway?
        Mr. Stumpf. Well, first of all, it was not a scam, and
    cross-selling is a way of deepening relationships. When
    customers use----
        Senator Warren. We have been through this, Mr. Stumpf. I
    asked you a very simple question. Do you know how much the
    value of your stock went up while this scam was going on?
        Mr. Stumpf. It is--all of my compensation is in our
    public----
        Senator Warren. Do you know how much it was?
        Mr. Stumpf. It is all in the public filing.
        Senator Warren. You are right. It is all in the public
    records because I looked it up. While this scam was going on,
    you personally held an average of 6.75 million shares of Wells
    stock. The share price during this time period went up by about
    $30, which comes out to more than $200 million in gains, all
    for you personally, and thanks in part to those cross-sell
    numbers that you talked about on every one of those calls.
        You know, here is what really gets me about this, Mr.
    Stumpf: If one of your tellers took a handful of $20 bills out
    of the cash drawer, they would probably be looking at criminal
    charges for theft. They could end up in prison. But you
    squeezed your employees to the breaking point so they would
    cheat customers and you could drive up the value of your stock
    and put hundreds of millions of dollars in your own pocket. And
    when it all blew up, you kept your job, you kept your multi-
    million-dollar bonuses, and you went on television to blame
    thousands of $12-an-hour employees who were just trying to meet
    cross-sell quotas that made you rich. This is about
    accountability. You should resign. You should give back the
    money that you took while this scam was going on, and you
    should be criminally investigated by both the Department of
    Justice and the Securities and Exchange Commission.
        This just is not right. A cashier who steals a handful of
    twenties is held accountable. But Wall Street executives almost
    never hold themselves accountable, not now and not in 2008,
    when they crushed the worldwide economy. The only way that Wall
    Street will change is if executives face jail time when they
    preside over massive frauds. We need tough new laws to hold
    corporate executives personally accountable, and we need tough
    prosecutors who have the courage to go after people at the top.
    Until then, it will be business as usual. And at giant banks
    like Wells Fargo, that seems to mean cheating as many
    customers, investors, and employees as they possibly can.
        Thank you, Mr. Chair.
        Chairman Shelby. Senator Vitter.
        Senator Vitter. Mr. Stumpf, what astounds so many Americans
    and virtually all of us is how significant this fraud was, how
    widespread it was, for how long a period of time. And related
    to that, I am very concerned about this timeline of when top
    corporate leadership like yourself knew about it. You have been
    talking in general about 2013. Is that when the issue was a
    focus of board discussions? Or was that the first time you knew
    of fraudulent activity and these unwanted accounts being opened
    against customers' wills?
        Mr. Stumpf. Thank you, Senator Vitter. As I testified
    before, this--people in our regional bank knew that not every
    team member would do everything right every day, and they tried
    to root it out at the business level with their compliance and
    so forth. And then once----
        Senator Vitter. When did you and folks at your level like
    board members know of this activity on any significant scale?
    Was it 2013, which you have suggested, or was it earlier?
        Mr. Stumpf. 2013.
        Senator Vitter. OK. So in 2011, about 1,000 employees were
    fired over this. That is about 1 percent of the whole retail
    business. So 1 percent of a whole big part of your business was
    fired over fraud, and you were never told about that.
        Mr. Stumpf. That was dealt with in the business unit at
    that time.
        Senator Vitter. Is it normal for 1 percent of a business
    unit to be fired over fraud--not high turnover, not
    incompetence, fraud--and this never is mentioned to you?
        Mr. Stumpf. In a large retail business that has other
    turnovers and so forth, if I could go back, I would have, you
    know, spent more time on this----
        Senator Vitter. Why isn't this crystal clear proof that an
    entity as big as Wells is not only too big to fail, but it is
    too big to manage and it is too big to regulate? One percent of
    a big part of your business is fired over fraud, but that does
    not rise to your level?
        Mr. Stumpf. And, Senator, that is a good question, and I
    have thought about that. This was a problem of focus and not of
    size. Today----
        Senator Vitter. Let us talk about corporate culture. You
    have often referred to people not living up to the Wells
    culture. Culture is not something written in a handbook.
    Culture, as has been suggested, is an atmosphere and what is
    lived.
        Mr. Stumpf. I agree.
        Senator Vitter. Was not this practice, in fact, by the
    numbers part of the Wells culture by definition because it was
    so widespread for so long a period of time?
        Mr. Stumpf. I think this is not part of our culture. This
    was the--and, again, it is a large number, but the vast
    majority of our people do it right every day, and they provide
    great value, and they live according to our culture, vision,
    and values.
        Senator Vitter. And if it was a widespread practice for
    many years--I will just make a statement--that makes it part of
    the culture, in my opinion. So it seems to me your challenge is
    to change the culture, not to enforce the culture.
        Finally, what level of confidence, from 0 percent to 100
    percent, do you have that this type of fraudulent activity does
    not exist in other Wells business lines?
        Mr. Stumpf. We have looked at other things, other
    businesses. They are different, and we believe that this is,
    you know, situated in our regional bank. Other areas have
    different levels of compliance and different volumes and
    different requirements. We have looked across a number of
    things, and I have confidence that we have this one solved, and
    we have made a lot of changes.
        Senator Vitter. So just as an example, Wells is the biggest
    participant in the SBA's 7(a) loan program. I happen to chair
    the Small Business Committee, so I am focused on a lot of small
    business issues. Are you 100 percent confident that no
    fraudulent activity like this or no extreme quotas and goals
    exist in that 7(a) program?
        Mr. Stumpf. We do not have product goals to my knowledge in
    any one of our other businesses, and we have--of course,
    because of this situation, we have doubled down on compliance
    and review in a lot of our businesses across the board.
        Senator Vitter. Well, I am writing several of those
    compliance folks to urge a look at anything small-business
    related, including the 7(a) program since Wells is the leader
    in that activity.
        Thank you, Mr. Chairman.
        Chairman Shelby. Senator Donnelly.
        Senator Donnelly. Thank you, Mr. Chairman.
        Mr. Stumpf, you had previously talked to me about Wells
    Fargo values and look at the mess we are in. A community banker
    from my State called the office, unsolicited, and is just sick,
    and he said, ``Here we go again where my bank is''--a local
    community bank, ``My bank is going to be slandered because of
    what these guys are doing.'' And he said, ``If my bank had a
    widespread practice of opening unauthorized accounts and moving
    customer money without permission, I would be in jail. My bank
    would be sold, and my entire management team and board would be
    sued by the regulators for a lack of oversight.'' And he is
    sick to his stomach about what has happened here. And so am I.
        Over 5,000 people from Indiana, 5,000 Hoosiers who every
    day, as everybody has talked about from their own States, every
    day these people work nonstop to try to pay the bills, take
    care of their family, make sure that they can make ends meet,
    and they hope that they can. Over 2 million-plus across the
    country but over 5,000 Hoosiers who had unauthorized accounts
    opened.
        Now, the second many of these credit cards are opened,
    these folks' credit was immediately dinged, and this is
    something Senator Tester was talking about. Then you go to take
    out a mortgage, and you have got a 30-year mortgage that is at
    half a point or a point higher because your credit rating has
    gone down. So what I want to know as one of these things is:
    Will you pay back every single extra dime that these people are
    going to incur over the 30 years because of the fraudulent
    action of the people at Wells? It was not Sam or Judy who works
    at the mill who is hoping to get a payment that they could
    afford. It was that their account had fraud committed to it,
    and now they have to pay more every single month for the next
    30 years. How do you pay that back?
        Mr. Stumpf. Yes, and thank you, Senator. We have been
    thinking about that. We are starting to call, make those calls
    to our constituents and find out our customers--and I do not
    have a final answer for you, but we will--our intention is to
    make it right by every customer.
        Senator Donnelly. So do you promise to pay back every
    single extra dollar these people are going to incur over the
    next 30 years?
        Mr. Stumpf. Senator, I want to work with you, and I am
    trying to be cooperative. I just do not have all those answers
    today. But I surely get the issue, and my instructions have
    been to make it right by every customer.
        Senator Donnelly. One of the things that rubs everybody
    wrong around here, but not just here, around the country,
    Americans are fair people, and everybody in this country tries
    to make sure that there is a square deal done. It is not a
    square deal when the people that are fired are the tellers who
    make 15 bucks and the senior execs walk off with $100 million.
    Americans can smell an unfair deal a mile away. And when this
    teller--these 5,300 tellers, they did not come up with this
    scheme on their own. This is the only way they could keep their
    jobs because of what was going on. And you called them
    dishonest. And my question is: Ms. Carrie Tolstedt, the head of
    all this, is she dishonest? And how do you fire someone making
    15 bucks and not the person--that is like firing the guy
    throwing coal in the engine and letting the captain go
    strolling off to a $100 million new ship. How do you do that?
        Mr. Stumpf. Yes, I think that is an important question.
    First of all, most of the people were bankers who were not
    making $15 an hour, managers of those, and managers of those.
    And there is something very different about violating our code
    of ethics and putting customers at risk and being dishonest.
    First, as someone who did not spend enough time making sure
    that this issue had been closed, I see a very big difference.
        Senator Donnelly. Well, I think one of the things that the
    American people are just disgusted about is it seems like it
    all flows downhill, and the people down the hill get fired, do
    not even know if they can pay their mortgage because of the job
    they had and they are gone, and that the people up on the top
    of the hill make $20 million, $10 million. You know, the
    fellows who started the Wells Fargo stagecoach, this was not
    their plan. This is not what we do. And the only last question
    I have--and I apologize, Mr. Chairman, but it is this: For 5
    years--5 years. And so when folks say this is too big to fail,
    for 5 years you were not able to end this. And you look and you
    go for 5 years Americans were taken advantage of and were
    cheated, had their credit ratings ruined, had accounts opened
    that they never even knew about. And this bank, either you did
    not know, or you knew and it was great for the story. You know,
    under any circumstance none of the conclusions is good.
        Mr. Stumpf. I could not agree with you more. We did not
    move fast enough. We should have done better. But I also want
    to remind you that the vast majority of our people also had
    families to feed, and they did exactly the right thing. But we
    are sorry, and we need to do better. Thank you.
        Senator Donnelly. Thank you, Mr. Chairman.
        Chairman Shelby. Senator Scott.
        Senator Scott. Thank you, Mr. Chairman. Good morning, Mr.
    Stumpf.
        Mr. Stumpf. Good morning, Senator Scott.
        Senator Scott. I will tell you, as a Senator I am
    frustrated, angry, and really unhappy with what appears to be a
    toxic culture in parts of your sales organization. As your
    customer, with two or three mortgages, a couple of accounts, I
    am disappointed. I am disappointed in my financial institution
    that I have put so much confidence and trust in.
        I am, however, thankful for the real heroes that we have
    heard so little about this morning, the heroes, the employees
    who went to the press, the customers who went to the OCC,
    bringing oxygen to a very important conversation, and hopefully
    resolution.
        I ask myself--and perhaps Rita Murillo gave me the answer--
    why did not these employees find a safe haven up the chain? If
    you will remember, I owned a couple of Allstate Insurance
    agencies, and so the sales culture that was so toxic is also
    incredibly important for folks looking to support their
    families, who are working paycheck to paycheck. And anyone who
    suggests that folks who make just a little money must cheat the
    system, it is an inconsistent suggestion. I know a lot of folks
    who are poor who would find that comment quite disrespectful,
    lots and lots--most poor folks have strong integrity and would
    never put themselves in this situation.
        I would suggest that perhaps the higher you go in that
    chain in the sales organization, the more you find the problem,
    not the person making the 15 bucks an hour, to be honest with
    you.
        My question, though, is: Why was there not a safe haven?
    And have you created safe havens for employees who see things
    that are just running amok, do they have a safe place to go?
    And not to the Los Angeles Times, not to the OCC, but is there
    a culture that is being established--I know you are limiting
    some of your sales goals, which have unintended consequences as
    well. But is there a culture being established where the
    average employee feels empowered, encouraged to come forward
    and speak and be heard in Wells Fargo?
        Mr. Stumpf. Senator Scott, I really appreciate that line of
    questions because it is absolutely--and I should have mentioned
    it. Each team member, no matter where you are in your
    organization, is encouraged to raise their hand if something is
    being asked of them that they think is not right, not
    consistent with our values and our culture. They are asked to
    raise their hand. They are asked to go to a manager's manager
    or HR. We also have an anonymous EthicsLine. They can speak up
    and show us and talk to us about anything they want. We want to
    hear from them, because we do not want this behavior. And I
    wish, you know, we would not have this behavior. But we have
    also instituted some things today--you know, and you mentioned
    getting rid of the sales goals. But we also today have an email
    we send within an hour of opening an account. No account can
    get opened today on a deposit side or credit card without a
    signature. And we are also doing a big mystery shopping
    program, with an independent third party to help tie it
    together.
        Senator Scott. Mr. Stumpf, I have to cut you off here. It
    is important for me to finish my line of questions. I am glad
    to hear that you are making progress.
        Mr. chairman, I would love for the record to have a better
    understanding of the culture of checks and balances that were
    not there that are now there that will help customers,
    thousands of customers throughout South Carolina, have more
    confidence in all financial institutions, and perhaps having
    done it wrong, you have become a model for doing it right.
        Mr. Stumpf. Thank you.
        Senator Scott. The second question I have goes back to the
    question we have heard from Crapo, from Tester, and so many
    others, that--and Donnelly. When you look at the impact on the
    consumer, the customer, you open the account--and I apologize
    now for going over my time for a minute or so. You have an
    account--I have a couple of accounts with the bank.
        Mr. Stumpf. Thank you.
        Senator Scott. I hope to keep them there.
        Mr. Stumpf. Thank you. We agree.
        Senator Scott. I hope to keep them there.
        Mr. Stumpf. Yes.
        Senator Scott. Someone opens an account, a fraudulent
    account. The definition of ``fraudulent,'' God bless Black's
    Dictionary. If I did not sign for it, it is fraudulent. I like
    to have simple definitions. So it opens an account in my name.
    I do not know the account is opened. So there are fees attached
    to some of the accounts. The fees that are attached are not
    paid because I am ignorant of those accounts. Those fees that
    are not paid because I do not know about them at some point are
    reported to a credit agency because I did not pay the fees,
    because I did not know about it because I did not open the
    account.
        So when these fees create a negative impact on my credit
    statement, it translates into higher interest rates, or, said
    differently, a different way of exacting resources out of my
    very limited pocket, especially for folks working paycheck to
    paycheck throughout South Carolina.
        Mr. Stumpf. Correct.
        Senator Scott. So when that happens, it is nearly
    impossible for us to figure out the actual dollar amount, as
    Senator Donnelly was looking for, of impact on all the
    customers that goes through. And I would like for it also to be
    included in the questions for the record some way of helping me
    and others understand how we create a solution for those
    customers who will obviously be identified by you or by a scoop
    of attorneys looking to sue.
        So I would love to understand and appreciate that process
    so that I can go back to my constituents who I work for and
    give them a plausible path forward for actual resolution for
    those who are injured and a clear path forward for restoring
    confidence in financial institutions, because my fear is that
    this is not going to simply be a Wells Fargo question. It will
    be a question for the entire financial footprint in our Nation.
        Mr. Stumpf. And I think it is a good point, and I think--
    and, again, I will need to check with our team, but I think we
    have already gone back on the deposit side and are making those
    fixes with the credit bureau and are working to rectify that.
    But I will make sure we get back to you and work with you on
    that issue.
        Senator Scott. Thank you, sir.
        Thank you, Mr. Chairman.
        Chairman Shelby. Senator Heitkamp.
        Senator Heitkamp. Thank you, Mr. Chairman, and thank you
    for calling this meeting.
        I know, Mr. Stumpf, there are probably many other places
    you would rather be right now, but I think this is a critical
    time as we look at the push that we have seen from so many
    financial institutions for lower regulatory burdens and trust
    us. What we have now lost has been trust not only between you
    and your customers, but in a very bipartisan way, between this
    Committee and large financial institutions. You have said
    repeatedly that one of your failures was that you did not act
    fast enough. Today you are sitting in front of this Committee,
    and I am telling you, you are still not acting fast enough. You
    still do not have the answers that we need to say that we are
    moving forward.
        And so let us start with remediation, and by that I mean
    repairing credit ratings, taking a look at refunds, taking a
    look at restoring to the customer what the customer lost. You
    have said repeatedly to the folks here, you know, ``We are
    working on it. We are working on it.'' You know, we start this
    story as far back as--we do not know, but let us start at 2011.
    At 2011, there is something going on, and Wells Fargo is
    addressing it. At 2013, there is
    something going on, and Wells Fargo is addressing it. At 2015,
    there is something going on, and Wells Fargo is addressing it.
    But yet it did not get done. And now you are coming to us and
    saying, ``Trust us. We now get it. Now we know. Now we have
    figured it out.''
        And so we need a clear dialogue, but I think that one of
    the failures today is you have not come with a whole lot of
    remediation; you have not come with a whole lot of dialogue to
    us on, ``This is what we are doing to restore customer
    confidence.'' And like Senator Scott, I am one of your
    customers. My whole family is. You are not doing what you need
    to do to restore customer confidence. But you are also not
    doing what you need to do to restore confidence with this
    Committee and with the American public.
        I want to talk about changing culture. There is no one on
    this Committee who believes that 5,000 people independently act
    with impunity and with dishonesty. No one here believes that,
    and if they do--I have done law enforcement. This is a behavior
    that was created by the culture that was allowed, created by a
    whole lot of folks saying, you know, ``Let us do it this way.''
    This is not--and I get what you are saying, that it was not
    just the tellers, it was not just the lower level. But yet the
    one person, the one person who was responsible directly--other
    than yourself--for making sure this does not happen is not in
    front of this Committee today. In fact, she has walked off with
    a pretty good deal and hoping that all of this blows over.
        And the other thing, when you say you did not act quickly
    enough, the board should have already acted to claw back those
    salaries. If you had come here and said, ``The board now is
    clawing back; these are the things that we are doing,'' you
    would be in a lot better position sitting in that chair right
    now. And so I will tell you, you have not done enough to
    restore confidence today, and this dialogue will continue with
    this Committee and with the American public.
        Now, with that said, I want to turn to the 5,000 people,
    and I want to say maybe they deserve to have their reputation
    restored. Maybe they deserve to not be that person whose resume
    now says, ``Fired.'' Maybe instead of just focusing on your
    customers, you ought to focus on the 5,000 people, who I am
    pretty sure did not unilaterally decide to be dishonest. And so
    it is an issue that has not been raised here, but I think it is
    a critical issue, because when you punish the guy at the end of
    the line and you do not punish in any way someone at the top,
    we end up with an attitude that, quite frankly, this is a
    corporate culture that does not care, they are just trying to
    get through the day. And I do not think that your day yet has
    ended.
        And so I want to thank you for appearing, but it is not
    enough, and it is not nearly what I had hoped you would come
    with today. Thank you.
        Chairman Shelby. Senator Moran.
        Senator Moran. Mr. Chairman, thank you. Mr. Stumpf, good
    morning.
        Mr. Stumpf. Good morning.
        Senator Moran. As I understand the circumstances, the
    factual circumstances, many of the problems, while they were
    systemwide, many of the problems were focused in the Los
    Angeles area within your banking system. Is that true?
        Mr. Stumpf. It is true that that is the largest part of our
    business, but they were also focused there, yes.
        Senator Moran. And have you analyzed sufficiently to
    determine what was different about Los Angeles than places
    elsewhere in your banking system that would suggest that the
    number of times, the volume of fraudulent acts that occurred
    there--how do you explain that?
        Mr. Stumpf. Well, as Senator Heitkamp said--and if I did
    not share this, I want to make sure--I also agree 5,000 people
    just do not do 5,000 random things on their own. I am sure
    there were people talking to one another within a branch and so
    forth. But that analytical work is being done and has been
    done. I do not happen to have it here. I will have our team
    work with your staff to make sure that you have whatever you
    need on that.
        Senator Moran. I would welcome that. I am interested in
    knowing if you see this as a customer issue, a more vulnerable
    population of banking customers, or as the word ``culture'' has
    been used here a number of times, was there something different
    about Los Angeles--which I assume--again, I think illegal
    behavior, immoral behavior, breaking the rules, is wrong
    wherever it happens. But our goal in management, your
    management of a financial institution, is to diminish the
    chances of that happening.
        Mr. Stumpf. Right.
        Senator Moran. So you never condone bad behavior, but we
    want to make certain that the circumstances in which it is
    discouraged and never encouraged, and I do not have a feel for
    that circumstance. I do not know what really are the facts
    within the banking leadership that may have encouraged this
    behavior.
        We have seen this before. I serve, with a number of my
    colleagues, including Senator Brown, on the Veterans Committee,
    where we saw the consequences of a system that rewarded
    appointments for veterans who needed medical care.
        Mr. Stumpf. Correct.
        Senator Moran. We saw a scandal across the country in which
    veterans were put on a list, suggesting they had an
    appointment. They did not. The circumstances in which those
    individuals were listed as having an appointment, the
    allegation certainly exists that there was death as a result of
    the failure of the VA system to provide necessary health care.
        Mr. Stumpf. Correct.
        Senator Moran. I think a point that Senator Heitkamp made I
    would make to you again. There are a number of us on this
    Committee and in Congress who work to try to find the right
    regulatory balance for financial institutions, and just to
    stress with you the importance of then having our financial
    institutions behave, their behavior, their conduct be a certain
    level; otherwise, it undermines the efforts for that attempt to
    change the regulatory environment for financial success. And we
    particularly focused that on community banks, but we care about
    those financial institutions that have a relationship with
    their customers. And one of the arguments that has been made is
    those relationship bankers can rely upon the relationship. And
    what we are hearing from the circumstance that we find at Wells
    Fargo is that relationship was taken advantage of; it did not
    accrue to the benefit of the customer.
        Mr. Stumpf. And, Senator, you are right for that portion,
    and what hurts so much is that we spend so much time trying to
    do the right thing, and when a customer gets a product that is
    not used or not benefiting them, that hurts them and it hurts
    us. We have no interest--and if I could just take 1 second, I
    want to correct, Mr. Chairman, or share something that I was
    not as clear on. On consumer deposit account fees, none of
    those were reported to credit bureaus. So the consumer credit
    bureau impact relates exclusively to credit cards, and we are
    going to run each one of those down. Thank you.
        Senator Moran. Mr. Stumpf, let me ask a final question. So
    I do not think you have provided us with a precise timeframe in
    which regulators were notified, but I would be interested in
    knowing what regulators were notified when, who, and what steps
    they then took as regulators in response to the information
    they had.
        Mr. Stumpf. OK. And, again, my recollection is that our
    prudential regulator, the OCC, was involved and notified and
    active in the 2013 timeframe. At about the time of the lawsuit
    from the city of Los Angeles, we informed the CFPB. And so I
    can tell you what we did. And I know you have a panel later
    with them, but that is my recollection.
        Senator Moran. None of these actions at Wells Fargo came to
    light as a result of the regulators finding that behavior. It
    was reported to them subsequent. Is that true?
        Mr. Stumpf. You know, again, I want to be--I do not want to
    speak for them, and I do not know what part of this is
    confidential supervisory information. But my recollection of
    what we did was deal with this issue, terminate people, inform
    our prudential regulator, and after the city of Los Angeles,
    inform the CFPB.
        Senator Moran. Finally, I would say that in my experience
    in dealing with the Department of Veterans Affairs and their
    circumstance, in way too many instances, in my view, the
    employees became the scapegoat for what I saw as actions or
    encouragement, behavior by their supervisors. And I would
    encourage you in your circumstance to make certain that the
    employees are not the scapegoat for behavior at higher levels.
        Mr. Stumpf. I think that is a great point, Senator, and I
    am--you know, the 268,000 that come to work every day of our
    team members, they are the most fabulous people, you know, and
    I just love them and what they do. But the 5,300, for whatever
    reason, they were dishonest, and I am not scapegoating, but
    that is not part of our culture. And some of those--many of
    those jobs, most of them, were very good American jobs.
        Senator Moran. Thank you, Chairman.
        Chairman Shelby. Senator Merkley.
        Senator Merkley. Thank you.
        Mr. Stumpf, did Wells Fargo create a pressure cooker sales
    culture that put personal bankers and tellers in an impossible
    situation between a rock and a hard place?
        Mr. Stumpf. I do not believe that, because 90--you know,
    the vast majority----
        Senator Merkley. Let me continue.
        Mr. Stumpf. OK.
        Senator Merkley. I got your answer. Thank you.
        So Rita Murillo, a branch manager, said, ``Regional bosses
    required hourly conferences on her Florida branch's progress
    toward daily quotas for opening accounts and selling customers
    extras, such as overdraft protection''--an issue that has not
    been addressed yet.

            Employees who lagged behind had to stay late and work weekends
            . . . Then came the threats: Anyone falling short after 2
            months would be fired. We were constantly told we would be
            working for McDonald's . . . If we did not make the sales
            quotas--we had to stay for . . . after-school detention, it
            felt like, or report to a call session on Saturdays.

    Is that a pressure culture situation, putting tellers and
    personal bankers in an impossible situation?
        Mr. Stumpf. Senator, that has no place in our culture. I
    have actually read that, and it hurt to hear those words. And
    people like that do not belong here.
        Senator Merkley. Erick Estrada, a former personal banker
    and business specialist, said managers there coached workers on
    how to inflate sales numbers. Employees opened duplicate
    accounts, sometimes without customers' knowledge. They used a
    database to identify customers who had been pre-approved for
    credit cards, then ordered them. They were coached on it. Is
    that a setting in which a pressure culture--pressure cooker
    culture really puts the personal bankers in an impossible
    situation?
        Mr. Stumpf. That has no place in Wells Fargo. There is
    nothing that we did to encourage that.
        Senator Merkley. Nothing you did, but bank managers were
    being coached on how to coach their employees on how to do
    this? How about a branch manager in the Pacific Northwest,
    where I come from? She was very upset, finding employees who
    had talked a homeless woman into opening six checking accounts.
    She said, ``It is all manipulation. We are taught exactly how
    to sell multiple accounts. It sounds good, but in reality it
    does not benefit most customers.''
        Or let us talk about Yesenia Guitron, who, in 2008, after
    being hired for 2 months, found that this was happening, these
    false accounts were happening. She went to her trainer, then
    she went to her manager, and she was basically found--she was
    pushed very hard to shut up in all kinds of different ways.
        So you say, ``Well, the employee could have gone to
    somebody.'' She did. And eventually she filed a whistleblower
    suit. And why did Wells Fargo say that that was not legitimate?
    I will just save you the time. The answer is because Wells
    Fargo said, ``We fired her because she did not meet her
    quotas.''
        So here we have a situation where employees are written up,
    they have to stay late, they have to come in on weekends to be
    coached, they are at risk of being fired. That sounds like a
    systemic management strategy for cross-selling. But you refuse
    to take any responsibility, blaming it on the personal ethics
    of individual employees who were at risk of losing their job if
    they did not meet their ``daily solutions target.''
        Can you even conceivably place yourself in the position of
    an ordinary working person, who has a child in day care, they
    are told they are going to be fired if they do not meet these
    solutions, they are being coached on how to do it by their
    manager, and say there was no culture established that caused
    these problems?
        Mr. Stumpf. Sir, Senator, I am very sorry that that
    happened. That was not what we wanted to have happen. When
    those things happened, I wish we would have rooted all of it
    out. And the vast majority of our people did it the right way--
    --
        Senator Merkley. Sharif Kellogg said:

            The branch managers were always asking, `How many solutions'--
            that is the signing of new accounts--`did you sell today?' They
            wanted three to four a day. They wanted three to four a day. In
            my mind, that was crazy. That is not how people's financial
            lives work. I was always getting written up for failing to bump
            up my solutions numbers.

        Some employees would ask local business owners who they
    knew well to open additional accounts as favors to them. ``It
    seems as though you would have to be willfully ignorant to
    believe that these goals are achievable through any other
    means.''
        Cross-selling is a major pride point for the management of
    Wells Fargo, including your reports to--annual reports to
    customers. It was so high because you created a culture of
    cross-selling that pushed everyone to the maximum, and the
    casualties are these folks who were going to be fired because
    they would lose their jobs if they did not meet it. And yet you
    can only sit here and say there was no coaching, there was no
    management strategy. Cross-selling was at the heart of Wells
    Fargo's program, and you were at the top of this for a very
    long time.
        Let us go back to 2005, 2007, 2010. You had one major
    position and promotion after another. Cross-selling was at the
    heart of it, and you just sit here and blame the little person
    who was pressured into an impossible situation. Isn't that
    really kind of, for want of another word, a failure to accept
    responsibility?
        Mr. Stumpf. Senator, I started out today by accepting full
    responsibility. We like the idea----
        Senator Merkley. Accepting full responsibility for
    establishing a culture that put people in an impossible
    situation would be to
    resign, as my colleague suggested. It would be to return your
    funds and help fund assistance for all these people who were
    fired because of the culture you established and that you
    personally benefited an enormous amount from. But all you say,
    you say, ``I accept responsibility. And, by the way, it is the
    fault of those 5,000 people who just were not ethical enough
    and open an account they should not have opened.'' That is not
    accepting responsibility. This was a systemic problem that you
    benefited from enormously, the bank benefited from enormously,
    and you are scapegoating the people at the very bottom.
        Mr. Stumpf. Senator, I am--I just need--I do not want to be
    confrontational, but I want to just tell you that the vast
    majority did the right thing. We love the idea of having deep,
    mutually beneficial relationships with our customers. Having a
    product that a customer does not use, does not need, or does
    not want does not help the customer, it does not help me, and
    it does not help the shareholder.
        Senator Merkley. You signed Sarbanes-Oxley reports. Did you
    ever reveal the problems with this high-pressure sales strategy
    in terms of fraudulent credit accounts at any time in that
    course toward 2 million--2 million--fraudulent accounts? Did
    you ever disclose that to your investors?
        Mr. Stumpf. Well, let me just say----
        Senator Merkley. Well, ``yes'' or ``no.'' It is a simple
    question.
        Mr. Stumpf. Senator, the question is 2 million fraudulent--
    there were 2 million accounts that we could not rule out as a
    possibility that they were not authorized.
        Senator Merkley. I am so glad you crossed that ``t'' and
    dotted that ``i.'' Did you ever disclose the systemic problem
    of fraudulent accounts to your investors?
        Mr. Stumpf. It was--it was not a material event.
        Senator Merkley. So you bragged on the one end about the
    intensive ability to get cross-selling and how that would be
    beneficial, but the problems that came from that strategy, the
    very problem that dozens and dozens of people have shared their
    stories about how it was on the ground, and you can only blame
    them for ethical lapses. You never disclosed you had a systemic
    problem.
        Mr. Stumpf. Again----
        Senator Merkley. When you sign those reports personally--
    that is what Sarbanes-Oxley was--didn't you think that that was
    material when you are saying, ``This is our big win, our cross-
    selling strategy,'' not to disclose that it also had a dark
    side?
        Mr. Stumpf. There was a lot of things that our customers do
    and a lot of businesses that we have. This is one ratio, and
    most of this business--first of all, most of the deposit
    accounts are off the books. Most of them went on and off within
    the same or next quarter in which they happened. Having a
    customer have a product that they do not need is not helpful.
    It is not what we want.
        Senator Merkley. I want to close just by saying I would
    like to hear about the amount of slamming that went on on
    overdraft protection since that has come up, and a number of
    the employees talked about how they were pressured into adding
    that. Do you have details on that?
        Mr. Stumpf. I do not. I can have my staff----
        Senator Merkley. Can you get extensive details on that?
        Mr. Stumpf. I do not know of that issue off the top of my
    head, but I will have my staff--I will instruct them to work
    with your team as quickly as they can.
        Senator Merkley. Can you get the information for the full
    Committee?
        Mr. Stumpf. I will have my team work with your team. I do
    not even know exactly what we are talking about.
        Senator Merkley. You do not know what overdraft protection
    is?
        Mr. Stumpf. I know what overdraft protection is. I know
    that we had a credit card product for an overdraft protection,
    but I will have my team work with your team.
        Senator Merkley. And please get the information to the full
    Committee. Thank you.
        Chairman Shelby. Senator Brown, you have another question?
        Senator Brown. Thank you, Mr. Chairman, and thank you for
    starting a second round. I appreciate that. There is so much
    more to discuss.
        First, I ask unanimous consent to enter into the record the
    testimony in the House by Khalid Taha and Julie Miller, two
    people who worked at Wells Fargo.
        Chairman Shelby. Without objection.
        Senator Brown. Thank you, Mr. Chairman.
        Senator Brown. A couple of clarifications of points and
    then two or three more questions, Mr. Stumpf. We have discussed
    who was fired, whether the employees were fired. Understand--
    and just for those watching and listening and for the record
    especially--90 percent of the people fired were not managers.
    That means they were tellers, $12 to $15 an hour; personal
    bankers, $16 to maybe $18 or $19 or $20 an hour; but most of
    the people fired were not branch managers and were not regional
    managers.
        Second, there was a mention that only credit cards would
    affect credit scores in the answer to one of these questions.
    But if funds were moved out of a checking account and someone
    bounced a check for a car payment, that could end up affecting
    credit scores. So while it may narrowly be only credit cards,
    it really is not in that definition.
        A couple of questions. Senator Scott asked about where
    employees can go with ethics concerns, Mr. Stumpf. It sounded
    from whistleblower lawsuits that an ethics complaint often
    resulted in confronting the very managers condoning this
    behavior. Is that true?
        Mr. Stumpf. I do not believe that is true. I do not know. I
    can get back to you on that.
        Senator Brown. How do you register an ethics complaint
    other than calling CFPB or the LA County Attorney or the Los
    Angeles Times?
        Mr. Stumpf. As I understand how our EthicsLine works, you
    call. It is an anonymous call. It is handled by a third party
    outside of the company who does work on that and then reports
    it to the company.
        Senator Brown. I would like more on that, because my
    understanding is that at least initially you have to confront
    your supervisor, who has much to say about it.
        Senator Brown. Now that we know what we do, will Wells
    Fargo continue to take the position in court that contractual
    agreements on mandatory arbitration--this is a question about
    mandatory arbitration, the fine print of so many of these
    contracts, if you will. Will Wells Fargo continue to take the
    position in court that contractual agreements on mandatory
    arbitration covering real accounts will apply to fraudulent
    ones as well and that customers will be forced into arbitration
    rather than having access to the courts?
        Mr. Stumpf. Well, I have instructed our team to do whatever
    it takes within reason to take care of these customers. I would
    have to talk to my legal team, and we can get back to you on
    that.
        Senator Brown. All right. Understanding what has happened
    in the past, these mandatory arbitration clauses, which many of
    us I know on this Committee do not think are fair generally and
    most customers do not understand that they are part of a
    mandatory--do not even know what it is and part of a mandatory
    arbitration arrangement, that that has been applied to these
    fraudulent accounts in addition to the ones that were not
    fraudulent.
    Understand that is what has happened, and I hope your answer is
    specifically in response to that.
        Mr. Stumpf. Well, again, I will talk to our team, and we
    will get back to you. Again, I am not an expert in that.
        Senator Brown. Ms. Tolstedt reported directly to you. How
    frequently did you talk to one another?
        Mr. Stumpf. We had at least weekly meetings.
        Senator Brown. And from 2007, when you both took your
    respective roles, until the end of 2013, did none of this
    firing for fraudulent accounts and all, did none of this ever
    come up in your weekly or more-than-weekly meetings?
        Mr. Stumpf. I remember being--at least it making an
    impression upon me in 2013.
        Senator Brown. But from 2007, when you had your respective
    roles--so for 6 years, regular meetings with one of your most
    important--one of your most important managers, this discussion
    of 1,000 people a year, beginning in 2011--but we may go
    earlier than that, we think--those discussions, you have no
    recall that that ever came up?
        Mr. Stumpf. Not in the way I had in 2013.
        Senator Brown. OK. Over the past 10 years, your bank has
    had approximately 39 enforcement actions, just a few of which
    have come up today. Many were related to failure to serve or
    abusive conduct toward customers and investors. You talk much
    about Wells' culture, how proud you are of it, and its ethics.
    What does this say--if you have had 39 enforcement actions,
    what does this say about Wells' culture and compliance
    programs?
        Mr. Stumpf. We have more work to do, and we are trying
    very, very hard to build out all the compliance that we need to
    be--you know, to treat customers fairly and to make sure that
    we do things right every day.
        Senator Brown. The last question, Mr. Chairman. I
    appreciate your indulgence.
        Chairman Shelby. Senator Menendez----
        Senator Brown. No, could I just do this last question? I am
    sorry, Mr. Chairman.
        We know about the 5,300 employees who you say committed
    some--many people up here have said that the pressure on them
    was so great that they did things that they should not have, or
    maybe you have--you said they all--I think you said they
    deserved to be fired. What about the people who got--
    understanding, too, that is 5,300. Then there were at least
    hundreds more who refused to cheat or quit just because they
    did not want to be part of this and they saw what happened to
    others. But what about the people who got fired for not meeting
    goals that you now are saying were ill-advised? So there was a
    large--I think certainly a significant number of people who
    were fired for not meeting their goals. Now you say those goals
    were ill-advised. What do you do to make those employees--how
    do you identify them? How many are there? And what do you do to
    make those employees whole?
        Mr. Stumpf. Yes, I have to talk with our team. I do not
    know about those numbers. I do not know how significant or
    widespread that is, and I can get back to you on that.
        Senator Brown. Well, more precisely--I understand. I
    expected you not to know that number. But if there is one, that
    is one. If there are a hundred or a thousand. For those that
    were fired for not meeting those goals that you say are now
    ill-advised, do you have plans to make them whole?
        Mr. Stumpf. Yes, I would have to talk to our team. Again, I
    do not know the numbers, and I just--I frankly have not worked
    closely----
        Senator Brown. I did not expect you to know the numbers,
    but does it--in your mind and your conscience, does it say
    those people were fired because they did not meet goals, reach
    goals, the goals were ill-advised, shouldn't you make it up to
    them?
        Mr. Stumpf. Well, again, I do not even--you know, I know
    where you are going with your line of questioning. I am trying
    to be cooperative. I just have not--I have not talked to our HR
    team. I do not know the numbers. I do not know the situations.
    I do not know if there are other things involved. So I----
        Senator Brown. Again, I am less concerned about the numbers
    than the morality of it. I would like to at least ask you to do
    this, then: Once you have made that determination of how many
    there are, I would like you to make them whole; and if you are
    not willing to make them whole, I would like a written response
    about why you have made the decision not to make them whole.
        Mr. Stumpf. OK. I will talk to our team, and we will get
    back to you.
        Senator Brown. Thank you.
        Chairman Shelby. Senator Menendez.
        Senator Menendez. Thank you, Mr. Chairman.
        Mr. Stumpf, let me give you a real-life example. We are
    talking about people whose credit scores were hurt. Linda
    Edwards and her daughter are Wells Fargo customers from New
    Jersey. Accounts were opened in the name--without their
    acquiescence, knowledge, including credit cards--of her
    daughter who was just starting college. She has a negative
    consequence on her credit score, which has not been resolved by
    Wells Fargo. She happened--you got the wrong person when you
    did it to this lady because she happened to be a former staffer
    at the New Jersey Division of Banking and Insurance. And when
    she called your company and asked for the fraud division, she
    was told, ``No. Just call customer service.''
        So to this day, that question of her daughter's credit
    score, who is starting college and obviously wants a good
    credit score, is affected. So there are real live people who
    Wells Fargo has not responded to.
        Let me ask you this: Is cross-selling an industry-wide
    reality, as is evidenced by Wells Fargo? Or is it unique to
    Wells Fargo?
        Mr. Stumpf. I do not know what other companies do. I know
    that we view it as an important metric as it relates to depth
    of relationship, and relationship----
        Senator Menendez. You do not know if other banks do this?
        Mr. Stumpf. I would--I do not know.
        Senator Menendez. You do not review what your competition
    is doing to figure out whether there is something you should be
    doing, and so you do not have any idea if they do cross-
    selling?
        Mr. Stumpf. I do not know that.
        Senator Menendez. OK. We will have to ask the regulators.
    Let me ask you this: You said it was not a material event to
    Senator Merkley. Not a material----
        Mr. Stumpf. A material financial event.
        Senator Menendez. How about a material event for the SEC
    disclosure, which you said you never made?
        Mr. Stumpf. You know, I am not a lawyer, and I rely on my
    legal team----
        Senator Menendez. Based upon what has happened to the stock
    for your shareholders, it definitely was a material event that
    should have come forward.
        Let me ask you this: Ms. Tolstedt--in response to one of
    the questions, you said that you and I think the COO met with
    her and said you wanted to move in a different direction.
        Mr. Stumpf. Correct.
        Senator Menendez. And she decided to leave. That sounds to
    me a lot like you can either leave or you are not going to--you
    are going to be fired, maybe. But is it that you created a
    situation to give her the option to leave because you were
    concerned about what she might say about practices of the bank
    and higher-ups?
        Mr. Stumpf. In fact, when Tim Sloan, our Chief Operating
    Officer and President, talked with her, said we want to go in a
    different direction, there were a number of things he was
    thinking about doing different in the business, and we had not
    made enough--along with my consultation, not made enough
    progress here, and she was retirement eligible. She decided to
    retire. It never went beyond that.
        Senator Menendez. You had no concerns of what she might say
    if brought before the Senate or any other entity and put under
    oath about what she might say about what was known or not
    known?
        Mr. Stumpf. That did not even come into the----
        Senator Menendez. Well, let me ask you this: What were the
    repercussions of not meeting sales quotas besides not getting
    the bonus? Can you tell me how many workers faced discipline
    over the same 5-year period for failing to meet sales goals?
    How many workers that failed to meet those sales goals were
    terminated?
        Mr. Stumpf. I do not have those numbers, but I will tell
    you this, Senator----
        Senator Menendez. Well, I think it is important to know
    those numbers. You do not know how many people you terminated--
    you know how many people you terminated who you said did the
    wrong thing, but you do not know how many people you terminated
    because they did not meet the overwhelming cooker boiler that
    you put them under?
        Mr. Stumpf. I do not have those--I do not have those
    numbers.
        Senator Menendez. Well, I would like you to get those
    numbers to the Committee.
        Mr. Stumpf. I will talk with our team, and I will, as far
    as I can.
        Senator Menendez. You said to Senator Scott that, of
    course, there were opportunities, when he asked about safe
    harbors. You could raise your hand. There was an anonymous
    EthicsLine. There was no pressure cooker.
        Now, do you read your emails, Mr. Stumpf?
        Mr. Stumpf. I read my emails.
        Senator Menendez. OK. So I would like to read to you an
    excerpt from an email one my constituents sent to you in 2011.
    She was a branch manager at Wells Fargo, and I spoke to her
    yesterday about her experiences at Wells Fargo. In 2011, she
    wrote to you, and I am quoting now:

            I am currently an Assistant Vice President Manager at----

    ----and I will leave the location out----

            ----in northern New Jersey. I have been an employee of Wachovia
            for over 22 years, which Wells Fargo acquired. I am writing to
            you because as a team member I feel hurt and disappointed with
            this company. There are challenges that team members are faced
            with, but those should not be the reason to move money from one
            account to another and to fool the motivator----

    ----the person who you had to go to who constantly was
    badgering you about whether or not you had opened enough
    accounts----

            ----that we have new accounts. These funds that are moved to
            new accounts to show growth when in actuality there is no net
            gain to the company's deposit base is wrong. In the past
            months, I was placed on warning for not meeting these goals,
            and the reason that the bankers underneath me do not is because
            I will not tolerate the movement of existing money just because
            we need checking account solutions and profit proxy to move to
            the motivator. These accounts make no sense for the customer.

        Did you read that mail?
        Mr. Stumpf. I do not remember that one.
        Senator Menendez. OK. Well, she was fired. So much for the
    safe haven, so much for coming forth. She went to the President
    and CEO of the company--that is about as good as it gets--and
    she found no safe haven there.
        Finally, let me ask you this: In 2012, Wells Fargo, then
    and now the largest mortgage lender in the country, agreed to
    pay $175 million to settle accusations that the bank
    discriminated against African Americans and Hispanic borrowers
    in their mortgage lending from 2004 to 2009. An investigation
    by the Department of Justice's Civil Rights Division found that
    Wells Fargo discriminated by steering approximately 4,000
    African American and Hispanic borrowers into subprime mortgages
    when non-Hispanic white borrowers with similar credit profiles
    received prime loans.
        When I look at this history, I get concerned with what is
    going on here. Do you have demographics of those customers who
    were hurt in this process? And can you share it with the
    Committee?
        Mr. Stumpf. Yes. Let me just go back to that particular
    case. I regret that. That was done through a wholesale
    business. Other people outside of our company originated those
    mortgages, and we were closing them, and we shut down that
    division.
        In this case, we do not--when we take applications or when
    we do business for deposits and credit card, we capture age,
    and there was no--in fact, deposit accounts skewed toward, you
    know, younger to middle-age Americans.
        Senator Menendez. Well, I would suggest you read page
    36(d), item 36(d) on page 9 of the Los Angeles City Attorney's
    2015 complaint filed against Wells Fargo describing a Wells
    Fargo gaming practice of targeting individuals holding Mexican
    consular cards.
        Mr. Stumpf. I do not--I will look at that yes.
        Senator Menendez. Thank you, Mr. Chairman.
        Chairman Shelby. Senator Schumer.
        Senator Schumer. Well, thank you, and I apologize to the
    witness. It has been a busy morning.
        First, I want to just say--and I know other people have
    spoken about this--in terms of rescinding the bonuses, to the
    average American it just seems appalling that somebody who
    could make such large mistakes should be rewarded with almost
    an obscene amount of money, $120 million. And so I would
    simply--I am not going to--I know this has been discussed. I
    would say your bank has overall a good reputation. For the
    reputation of your bank, for the value of your shares, as well
    as relationships with customers, I would urgently urge you to
    not allow those bonuses to occur and urge that the compensation
    committee--I know which you sit on--to do that. That is just a
    statement for the record.
        Now, I would like to talk a little bit about the CFPB
    because they have done incredible work over the past 5 years.
    But this case exemplifies why the CFPB was created. The
    Consumer Financial Protection Bureau was formed to ensure that
    financial institutions that harm consumers through unfair,
    deceptive, or abusive practices are held accountable and that
    the consumers are made whole again. In fact, over the course of
    its short history, it has gotten $12 billion in relief and
    restitution. Today's hearing reminds us why the CFPB was
    formed. We needed a cop out on the beat. The incentives and
    practices that cross-selling goals promoted at Wells Fargo were
    very, very wrong and bad, as I am sure you said. They infected
    the work environment at branches in the country, and including
    in New York.
        Beyond the financial damage, Wells Fargo's actions violated
    consumer trust. Wells will have to work long and hard to regain
    the trust of millions of Americans, but those Americans can
    rest assured now more than ever, knowing that there is a CFPB
    out there.
        So I would just ask you, Mr. Stumpf, given what you have
    been through--and I know it has not been a pleasant
    experience--do you agree that Federal regulators like CFPB and
    OCC serve a valuable role in promoting safety and stability as
    well as necessary consumer protections? I am saying this
    because a lot of our friends on the other side of the aisle
    want to either get rid of or greatly reduce the power of the
    CFPB.
        Mr. Stumpf. We share the mission of all of our regulators
    created by Congress, including the CFPB, and we are working
    with all of them.
        Senator Schumer. So you think the CFPB is a necessary
    thing?
        Mr. Stumpf. Well, again, it is created by Congress, and we
    agree to work with all of them, and we have worked closely on
    this matter with them.
        Senator Schumer. OK. And do you believe that the reforms--I
    will let the answer speak for itself. We think the CFPB has
    done an outstanding job, and what has happened at the bank,
    whether--you know, however it happened, shows the need for it.
        OK. Do you believe that the reforms that Wells committed to
    and goals required under the consent agreement you signed with
    the CFPB will allow Wells to go back on a path of protecting
    customers' interests in putting consumers first?
        Mr. Stumpf. Yes, we believe--we have a lot of work to do.
        Senator Schumer. OK. As per the terms of the consent
    agreement, will you work with the CFPB to ensure that Wells'
    customers that were negatively impacted are made whole?
        Mr. Stumpf. Yes.
        Senator Schumer. Good. OK. Were you aware that the CFPB was
    aware of the cross-selling and looking into concerns about
    cross-selling as early as 2013?
        Mr. Stumpf. I only know what we did. I do not know what the
    CFPB----
        Senator Schumer. OK. They were. So they were on this case I
    think before at least your top management discovered this,
    which is to their credit.
        Mr. Stumpf. I do not know that.
        Senator Schumer. OK. Well, Director Cordray will be here---
        Chairman Shelby. In a minute.
        Senator Schumer.----in a little bit, so we will ask him and
    see if that was the case. I believe it to be the case.
        And, finally, do you believe that the actions taken by the
    CFPB here will lead other financial institutions to reevaluate
    and reconsider their own cross-selling practices?
        Mr. Stumpf. Yes, I would have no idea on that.
        Senator Schumer. Yes, I think they will. I think they will,
    and I think the CFPB has had a very salutary influence, and I
    would hope you would come around to the view that it is a
    necessary part of our system of banking and governing.
        Thank you, Mr. Chairman.
        Mr. Stumpf. Thank you. Mr. Chairman, if I just might make
    one comment.
        Chairman Shelby. Go ahead.
        Mr. Stumpf. Thank you, Senator Schumer, for your questions.
    You made a comment that I am on the human resources and
    compensation committee. I am not. I just want to make sure that
    is part of the record.
        Senator Schumer. OK. Well, I would still urge you to--is
    that the committee, though, that is in charge of the bonuses?
        Mr. Stumpf. That is the one that makes the recommendation
    to the full board, and, of course, I am not part of the full
    board in those decisions.
        Senator Schumer. OK. I would urge you to urge everybody who
    is on these committees to do just what we had asked.
        Mr. Stumpf. OK. Thank you.
        Senator Schumer. OK? Thank you.
        Chairman Shelby. Senator Warren.
        Senator Warren. Thank you, Mr. Chairman. And I want to say
    again thank you very much for being so responsive to us, for
    holding this hearing when we sent you a letter to ask you to do
    it, and thank you for being so generous about time.
        Chairman Shelby. I hope I am responsive to the American
    people----
        Senator Warren. I hope so, too.
        Chairman Shelby.----not just to you.
        Senator Warren. Thank you very much. I really appreciate
    your holding this hearing.
        Mr. Stumpf, as you know, some of my colleagues and I sent
    you a letter last week about the board's plans to claw back
    compensation from senior executives who were responsible for
    overseeing this scam. Wells Fargo provided us with a response
    yesterday. I noticed that although we sent the letter to you,
    the response actually came from somebody else in the company,
    which I guess is another example of holding yourself
    accountable.
        I want to focus now on the mysterious circumstances
    surrounding Carrie Tolstedt's retirement in July. As you know,
    Ms. Tolstedt ran the community banking division, the division
    where this scam occurred, for the entire time that the scam
    took place. She was in charge of all of the 5,300 employees who
    were fired, and she oversaw the creation of 2 million fake
    accounts.
        Now, in July of this year, just 2 months before the
    settlement was announced, and before those facts became public,
    Ms. Tolstedt retired at age 56. You indicated in the letter
    responding to our letter that she walks away with over $90
    million in stock, stock options, and awards. Fortune Magazine
    says it is actually about $125 million. But--and here is the
    key part--according to Fortune, if Ms. Tolstedt had been fired
    instead of retiring, she would have had to forfeit as much as
    $45 million of that award.
        Mr. Stumpf, the response to our letter confirms that you
    knew of this scandal before Ms. Tolstedt retired. It said--and
    this is from your letter:

            Senior management and the board were aware of the pending
            litigation, investigation, and discussions with our regulators
            relating to sales practices when Ms. Tolstedt indicated her
            decision to retire.

    Is that accurate, Mr. Stumpf, what this letter says? Were you
    personally aware of the massive problem that occurred under Ms.
    Tolstedt's watch in July when she announced her retirement?
        Mr. Stumpf. I was aware that we were involved in
    discussions with the City Attorney, the OCC, and the CFPB, yes.
        Senator Warren. So you had some indication there was a
    massive problem?
        Mr. Stumpf. We had some indication that we had 1 percent of
    our people who were doing the wrong thing.
        Senator Warren. Also known as a ``massive problem.''
        Mr. Stumpf. Well----
        Senator Warren. If you knew this, did you consider firing
    Ms. Tolstedt before she retired?
        Mr. Stumpf. Well, at the time she was reporting to our
    President and Chief Operating Officer, and----
        Senator Warren. It is a simple question. You knew there was
    a problem. Did you consider firing her?
        Mr. Stumpf. No, because of her----
        Senator Warren. Seriously? You found out that one of your
    divisions has created 2 million fake accounts, had fired
    thousands of employees for improper behavior, and had cheated
    thousands of your own customers, and you did not even once
    consider firing her ahead of her retirement?
        Mr. Stumpf. In fact, when I look at her full body of work
    and I look at the customer loyalty improvement and the customer
    service improvement----
        Senator Warren. Are you sure that those were not fake?
        Mr. Stumpf.----all the work that was done, she chose to
    retire. And I would also like to make one other comment,
    because you made----
        Senator Warren. No, just on this, you never considered
    firing her. So now Ms. Tolstedt has apparently retired, but is
    also staying with the firm through the end of the year. And in
    the response to our letter, you state--or the person writing it
    states, ``Ms. Tolstedt is eligible to be considered for a 2016
    annual incentive award.'' An incentive award for doing a great
    job in 2016? Mr. Stumpf, that is unbelievable. You are the
    Chairman of the Board and the CEO. In those roles, do you think
    it would be appropriate for Ms. Tolstedt to get another bonus
    on top of the millions that she has already gotten as a reward
    for her role in this massive scam?
        Mr. Stumpf. The board will consider that, and I do not want
    to prejudice the board. But I also want to make one----
        Senator Warren. I do not understand that answer. You know,
    you and your board have already made changes. You have made
    changes to the compensation scheme for thousands of employees.
    You have sat here today and talked about that. You have removed
    sales quotas, I think you told us. You have reformed
    incentives. Why can that be done quick as a wink across the
    entire bank, but a question about cutting compensation for a
    highly placed executive who oversaw a massive fraud takes long
    deliberation? Why is that?
        Mr. Stumpf. Because there is a board governance process,
    and we want that to work properly. And whether Carrie was
    retired or she was fired, there would be no difference with
    respect to how the board can deal with that.
        Senator Warren. I am sorry. If she was fired, it is my
    understanding she would not be entitled to large parts of her
    compensation. It is not just a clawback issue. We are talking
    about she does not get them to begin with if she gets fired.
    But you let her walk out of the door with a retirement. I do
    not quite understand. How do you explain this to your own
    shareholders?
        Mr. Stumpf. There is a process that the board goes through,
    and they will do that. They have already met, and we want to
    give that----
        Senator Warren. Mr. Stumpf, I do not understand. You keep
    saying, you know, ``the board, the board,'' as if these are
    strangers that you met in a dark alley. Under the by-laws of
    Wells Fargo--and I am quoting here--``The chairman shall
    preside at all meetings of the board.'' You were able to make
    changes. Why can you not make a change here?
        Mr. Stumpf. I am not on the human resources committee of
    the board. They have their own governance and structure. We
    want that to proceed in the process in which we have.
        Senator Warren. All right. So we will do this your way. Our
    letter asked a number of questions about clawbacks of Ms.
    Tolstedt's and other executives' pay, including yours. Wells
    Fargo's answer to our letter was just basically you punted,
    that the decision would be up to the board, the same punt you
    have given here. So you are the chairman of the board. Let me
    ask it this way: Will you personally support clawing back all
    or part of Ms. Tolstedt's pay?
        Mr. Stumpf. I am not going to in any way try to influence
    or prejudice the board as they do their deliberations.
        Senator Warren. So you have absolutely no opinion on this?
        Mr. Stumpf. I am not going to opine on that----
        Senator Warren. You are not going to opine on it. You are
    going to say, ``Get out there, defraud, cheat, lie, steal, and
    I have nothing to say about whether or not you ought to still
    be getting your bonus.''
        Mr. Stumpf. I have never said and we never say as our
    company to go out there and do any of those things. We try to
    do the right thing every day.
        Senator Warren. But you say if you do them, you can count
    on Chairman Stumpf not to stand up and say you should not get
    your incentive bonus.
        Mr. Stumpf. The board has a process, and----
        Senator Warren. I think you started this whole thing by
    saying, ``Do not tell me what you say. Tell me what your
    actions are.'' And your actions are people do this, and you are
    not going to take a single step to shut it down. So I guess I
    can ask this question again: Will you personally support
    clawing back any or all of the pay for the person in charge of
    compliance, someone we have not talked about much today, the
    person who is supposed to be responsible to make sure that the
    bank is following the law? Will you have any recommendation
    about that person?
        Mr. Stumpf. I am going to have the board do their process.
        Senator Warren. You are going to have no recommendation at
    all, ever, at any point in this process?
        Mr. Stumpf. Whatever the board accepts--whatever they do, I
    will accept and I will support.
        Senator Warren. You are not passive here. If you have
    nothing to do, what are you doing serving as chairman of the
    board? If you have no opinions on the most massive fraud that
    has hit this bank since the beginning of time, how can it be
    that you actually get to continue to collect a paycheck for
    being chairman of the board?
        Mr. Stumpf. First of all, I disagree with the fact this is
    a massive fraud. But, second, the board will do their work, and
    I am not going to prejudice their work. And I will be--and I
    will accept whatever they come up with, and I will be
    supportive.
        Senator Warren. You accepted all along as this fraud built
    up, this massive fraud, you accepted all of the performance
    bonuses based on the cross-selling that is at the heart of
    this. You watched your own stock go up by more than $200
    million based in part on exactly this massive fraud. You got
    out and you pumped it to Wall Street, and you said to Wall
    Street, ``Hey, we are doing such a great job cross-selling here
    at Wells Fargo. You should tell everybody to buy our stock.''
    And now you turn around and say, ``I shall remain passive and
    simply accept what Wells Fargo wants to do.''
        You know, in 2008, Wall Street promised change, but it
    looks like it is business as usual. A giant bank cheats the
    little guys, and the executives line their own pockets. Mr.
    Stumpf, you make it clear that Wall Street will not change
    until we make it change.
        Thank you, Mr. Chairman.
        Chairman Shelby. Mr. Stumpf, thank you for appearing today.
    We have some questions for the record. We have another panel. I
    hope you will answer these questions for the record. We have a
    number of them.
        Mr. Stumpf. OK. Thank you very much.
        Chairman Shelby. Thank you.
        Chairman Shelby. In our next panel, we will hear from Mr.
    Jim Clark, the Chief Deputy for the Los Angeles City Attorney's
    Office, whose office brought the 2015 case against Wells Fargo.
        Next we will hear from Mr. Curry, the Comptroller of the
    Currency, Wells Fargo's prudential regulator.
        And then we will hear from Director Cordray of the Consumer
    Financial Protection Bureau.
        Gentlemen, we appreciate all of you. We appreciate your
    patience today. We have had a very important and lengthy
    hearing.
        Mr. Clark, we will start with you, but all of your written
    testimony will be made part of the record in its entirety. You
    start. Hit the mic.
        Mr. Clark. Sorry about that.

       STATEMENT OF JAMES CLARK, CHIEF DEPUTY, OFFICE OF THE LOS
      ANGELES CITY ATTORNEY, ON BEHALF OF MICHAEL N. FEUER, CITY
               ATTORNEY, CITY OF LOS ANGELES, CALIFORNIA

        Mr. Clark. Chairman Shelby, Ranking Member Brown,
    esteemed Members of the Committee, I am Jim Clark, the Chief
    Deputy City Attorney of the city of Los Angeles. I am appearing
    on behalf of our City Attorney, Mike Feuer, who submitted
    written testimony but could not be with us today.
        I would like to tell you briefly what our office did and
    why, what we discovered, and the relief for consumers we sought
    and
    obtained.
        On a Sunday morning in December 2013, Angelenos opened the
    Los Angeles Times to find a shocking story by Times reporter
    Scott Reckard. The story described Wells Fargo Bank's sales
    culture and the harm that culture had caused its customers. The
    story read in part:

            To meet quotas, employees have opened unneeded accounts for
            customers, ordered credit cards without customers' permission,
            and forged client signatures on paperwork. Some employees
            begged family members to open ghost accounts.

        Our City Attorney, like thousands of other California
    consumers, was appalled by what he read. He immediately
    convened a meeting of key lawyers in our office to begin an
    investigation of the allegations of the story and determine if
    an action should be brought by our office under the California
    laws designed to protect consumers against unfair business
    practices.
        California's consumer protection laws do not afford our
    office pre-litigation subpoena powers, so our investigation
    essentially consisted of good old-fashioned detective work. We
    conducted dozens of interviews with current and former Wells
    Fargo employees and customers, pored over public documents,
    including court documents that were records of wrongful
    termination suits brought by
    terminated Wells Fargo employees, and we went to the Consumer
    Financial Protection Bureau and FTC consumer complaint
    databases.
        We found that the bank had victimized consumers by opening
    customer accounts and issuing credit cards and other products
    without the customer's knowledge or authorization. Our
    investigation revealed that the bank had failed to notify
    consumers once these unauthorized accounts had been opened and
    had not refunded fees for those unwanted products and services
    once the
    misconduct had been detected. We found instances in which the
    bank made it difficult, if not impossible, for customers to
    receive accurate information as to what exactly had happened to
    them. Many consumers were told that the unauthorized accounts
    would be closed; however, often that was not the case.
        We also found that Wells Fargo's business model imposed
    unrealistic quotas on salespeople, which incentivized employees
    to engage in highly aggressive sales tactics, creating a
    perfect storm for the unlawful activities we discovered.
        Our investigation consumed some 16 months and culminated on
    May 4, 2015, with our filing of a civil enforcement action in
    the name of the People of the State of California. That
    proceeding sought relief for consumers harmed by Wells Fargo's
    conduct and, equally important, was intended to put a stop to
    the illegal practices Wells Fargo had employed.
        In the days following our lawsuit, our office received
    calls, letters, and emails from more than 1,000 Wells Fargo
    customers and current and former employees. They described a
    veritable litany of horrific experiences. The consumers had
    money withdrawn from their authorized account to pay fees
    assessed by Wells Fargo to their unauthorized accounts. They
    complained that their unauthorized accounts were sent to debt
    collection agencies, and derogatory notes were placed on their
    credit reports.
        For the Wells employees, we learned of the perverse sales
    incentives Wells used and the extreme pressure placed upon
    employees to achieve often unrealistic sales quotas. In short,
    what we learned both before and after we filed our case was not
    only that Wells Fargo's conduct was inexcusable, but that it
    also seemed to be systemic and widespread.
        Earlier this month, we reached a settlement with Wells
    Fargo, which, in conjunction with the resolutions reached with
    the Federal agencies represented here today, provides for
    comprehensive remediation and corrective actions, and sends a
    strong message to Wells and its customers by imposing a $50
    million penalty, the largest in the history of our office. Our
    agreement first establishes a complaint and mediation system
    for California consumers harmed by the bank's practices, and it
    also requires Wells to continue a restitution program for those
    customers negatively affected by the practices. Wells Fargo
    also must alert all of its California customers who have
    consumer or small business checking or savings accounts, credit
    cards, or unsecured lines of credit to visit their local bank
    or call Wells Fargo to review their accounts, close accounts,
    or discontinue services they do not want, and resolve any
    remaining problems. Crucially, for the next 2 years, every 6
    months Wells Fargo must provide our office with audit reports
    signed by an officer or director of the bank under penalty of
    perjury assessing the bank's compliance with our agreement.
        It is critical to note that our settlement was coordinated
    with the enforcement efforts of our Federal partners: the
    Consumer Financial Protection Bureau and the Office of the
    Complaint of the Currency. As a result, remediation and
    corrective actions now extend nationwide. We would like to
    thank both agencies for their outstanding work. In our view,
    robust Government oversight is crucial to protecting consumers.
    When Federal, State, and local
    enforcement agencies collaborate and coordinate their efforts,
    protections consumers need and are entitled to are much more
    likely to be effective.
        There is a sacred trust that consumers put in their
    financial institutions--a faith that their hard-earned money
    will be safe and secure, and that all of their banks' actions
    will be at the highest ethical standards. Wells Fargo broke
    that trust. It cannot be
    allowed to happen again.
        Thank you.
        Chairman Shelby. Mr. Curry.

      STATEMENT OF THOMAS J. CURRY, COMPTROLLER OF THE CURRENCY,
                    OFFICE OF THE COMPTROLLER OF THE
                                CURRENCY

        Mr. Curry. Thank you. Chairman Shelby, Ranking Member
    Brown, and Members of the Committee, thank you for holding this
    hearing related to the unsafe and unsound sales practices at
    Wells Fargo.
        Let me begin by stating clearly that the sales practices at
    Wells Fargo involving employees opening unwanted accounts and
    making unauthorized transfers of customer funds, even
    temporarily, are outrageous. These practices, driven by
    misplaced incentives and
    enabled by weak risk management controls, undermine the
    fundamental trust that goes to the heart of the bank-customer
    relationship. They are unacceptable and have no place in the
    Federal banking system.
        The OCC's September 8th enforcement action builds on
    examination work that identified weaknesses in compliance risk
    management and consumer protection and subsequently focused on
    sales practices beginning in January 2014. The action requires
    Wells Fargo to pay a $35 million penalty to the United States
    Treasury, orders the bank to reimburse affected customers, and
    directs comprehensive corrective action to prevent such
    practices in the future. OCC examiners are closely monitoring
    the bank's corrective action and its reimbursement of harmed
    customers.
        Our work on this matter continues. I have ordered agency
    staff to review individual misconduct and culpability in this
    case. I have also directed our examiners to review the sales
    practices at all the large and mid-sized banks we supervise and
    assess the sufficiency of controls with respect to sales
    practices.
        As we continue to review this matter, more facts may come
    to light. My written testimony provides further details about
    the OCC's supervision of Wells Fargo leading to our enforcement
    action.
        The actions the OCC took, together with the Consumer
    Financial Protection Bureau and the Los Angeles City Attorney,
    rightfully hold the bank accountable and require necessary
    corrective action. However, I believe the OCC can and must do
    better. To that end, I have asked my Senior Deputy Comptroller
    for Enterprise Governance to conduct a postmortem to identify
    potential gaps in our supervision, and I will address any
    identified gaps.
        Enforcement actions such as these require thousands of
    hours of examination and investigation work. I want to express
    my appreciation for the OCC staff, who worked tirelessly on
    this issue, as well as our colleagues at the CFPB and the LA
    City Attorney's
    Office. The coordination in this case allowed us to take
    collective
    action that addressed the safety and soundness and the consumer
    protection aspects of the bank's deficiencies. Together, the
    orders demonstrate that such practices will not be tolerated.
        Since I became Comptroller, I have worked to strengthen our
    supervisory effectiveness, including through the 2014 adoption
    and implementation of heightened risk governance standards for
    our largest institutions. These enforceable guidelines
    emphasize the importance of three lines of defense in the
    detection and mitigation of risk--front-line business units,
    independent risk management, and internal audit--as well as the
    vital role of the board in providing a credible challenge to
    management actions. Had these structural elements been
    functioning properly, they would have prevented the type of
    abuses we have witnessed at Wells Fargo.
        The continued application of OCC's heightened standards for
    large banks will help ensure that they have the governance and
    controls necessary to prevent these sorts of practices in the
    future.
        The practices at the bank also demonstrate the importance
    of aligning incentives with appropriate behavior, which
    highlights the need to finalize the interagency incentives
    compensation rule sooner rather than later. As proposed, the
    rule would provide clear
    direction regarding the application of sound incentive
    compensation programs, including clawbacks, forfeiture, and
    other mechanisms to hold senior executives and other employees
    with significant responsibilities accountable. For those
    reasons, I support prompt completion of the final rule.
        Again, thank you for holding this important hearing today,
    and I look forward to answering your questions.
        Chairman Shelby. Mr. Cordray.

      STATEMENT OF RICHARD CORDRAY, DIRECTOR, CONSUMER FINANCIAL
                           PROTECTION BUREAU

        Mr. Cordray. Thank you, Chairman Shelby, Ranking Member
    Brown, and Members of the Committee. I will briefly discuss:
    one, what our investigations found about the sales practices at
    Wells Fargo; two, what we are seeking to achieve by our order;
    and, three, some thoughts about further steps to improve the
    culture and practices of the banking industry.
        On September 8th, the Consumer Bureau, together with our
    partners at this table, took an enforcement action against
    Wells Fargo Bank. Our investigations found that, in order to
    meet sales goals and collect bonuses for themselves, bank
    employees created unauthorized deposit and credit card
    accounts, enrolled consumers in online banking services, and
    ordered debit cards for consumers, all without their consent or
    even their knowledge. Some of these practices involved fake
    email accounts and phony PIN numbers.
        The fraudulent conduct occurred on a massive scale. As
    detailed in our order, Wells Fargo opened at least 1.5 million
    deposit accounts that may not have been authorized, including
    transferring funds from some customer accounts without their
    knowledge or consent. Wells Fargo also initiated applications
    for more than a half million credit card accounts that may not
    have been authorized, by using consumers' information without
    their knowledge or consent. These activities caused some
    consumers to incur fees. And even apart from that, they
    represent a staggering breach of trust and conduct that should
    never occur at any bank. Wells Fargo has demonstrated the epic
    scope of its failures by terminating at least 5,300 people thus
    far, including branch managers and managers of managers.
        The gravity and breadth of the fraud that occurred at Wells
    Fargo cannot be pushed aside as the stray misconduct of just a
    few bad apples. As one former Federal prosecutor has aptly
    noted, the stunning nature and scale of these practices
    reflects instead the consequences of a diseased orchard. As our
    order identifies, Wells Fargo built and refined an incentive
    compensation program and implemented sales goals to boost the
    cross-selling of products, but did so in a way that made it
    possible for its employees to pursue unfair and abusive sales
    practices.
        And I have a question for you: Do we really believe that
    5,300 people applied for jobs with Wells Fargo over the years
    intending and expecting and wanting that they were going to go
    into the bank and abuse consumers' trust and open phony
    accounts in their name? No. It was the Wells Fargo culture that
    made that happen.
        It appears that the bank did not monitor its program
    carefully, allowing thousands of employees to game the system
    and inflate their sales figures to meet their sales targets and
    claim higher bonuses under extreme pressure. Rather than put
    its customers first, Wells Fargo built and sustained a cross-
    selling program where the bank and many of its employees served
    themselves instead, violating the basic ethics of a banking
    institution, including the key norm of trust.
        Our order accomplishes several things. First, the details
    in the order that are a result of our investigation expose
    Wells Fargo's illegal misconduct, including its scale, for all
    to see for themselves. It has spawned vigorous public scrutiny
    over the past 2 weeks that no doubt will continue.
        Second, the order helps answer one question many of you
    have asked me from time to time: What does the term ``abusive''
    mean in our governing statute? Although we have been careful in
    analyzing all the ramifications of that new term, we did not
    hesitate for 1 minute to apply it emphatically to what we found
    here. In this matter, Wells Fargo engaged in abusive conduct
    toward its customers and consumers. We have said so, and
    executives, shareholders, and investors throughout the
    financial system will now have to consider what that means in
    their own efforts to address their cultures and practices going
    forward.
        Third, we have ensured that all consumers who suffered
    financial harm as a result of these practices will be fully
    compensated for that harm. Wells Fargo is required to set aside
    $5 million to cover all of that, and if it turns out to exceed
    $5 million--and it now appears we are going to go back further
    years--the bank will cover that as well.
        Fourth, we fined Wells Fargo $100 million, the largest fine
    that the Consumer Bureau has imposed on any financial company
    to date. That is a dramatic amount as compared to the actual
    financial harm to consumers, but it is justified here by the
    outrageous and abusive nature of these fraudulent practices on
    such an
    enormous scale. Some have said maybe this is not enough; some
    have said it is too much. As for whether we have done enough
    here, it is notable that the order itself is generating
    considerable consequences, including market effects,
    shareholder activity, further potential lawsuits, and follow-up
    investigations by other public officials that may be either
    civil or criminal in nature.
        Fifth, the order requires independent consultants to be
    installed at Wells Fargo to ensure that all consumers are fully
    compensated and that changes in sales practices are fully
    implemented so this misconduct does not recur. The top
    executives at Wells Fargo and its board of directors will be
    directly engaged in this work. If the independent consultants
    identify any further issues or concerns--and they may--we will
    address those as well.
        Let me conclude with some more general concerns. As one of
    the biggest and best known banks in the United States, Wells
    Fargo is in a position to lead by example in terms of how every
    bank should treat its customers. In the wake of this order, it
    now must do so. Much bank growth these days occurs by cross-
    selling customers on more products and services. There is a
    right way to do that, which should lead banks to focus on
    strong customer service that produces high levels of customer
    satisfaction, which in turn generates repeat business from
    existing customers and positive word of mouth to others.
        There is also a wrong way to do that. As we have seen here,
    unchecked incentives and an unrealistic and uncaring culture of
    high-pressure sales targets can lead to serious consumer harm.
    Incentive compensation structures are common in businesses, and
    they can motivate positive behavior. Yet companies need to pay
    close attention to their compliance monitoring systems in order
    to prevent violations of the law and abusive practices.
        This action should serve notice to the entire industry. If
    sales targets and incentive compensation schemes are
    implemented in ways that threaten harm to consumers and lead to
    violations of the law, then banks and other financial companies
    will be held accountable. We have seen the risk such programs
    pose across the entire financial sector. We have dealt with it
    in debt collection, mortgage origination, credit card add-on
    products, and now here, and we will continue to take action to
    protect consumers.
        Thank you again to our partners here at this table--I am
    proud of our team and their teams--who worked with us on this
    important enforcement action, and I am happy to answer your
    questions. Thank you.
        Chairman Shelby. I thank all three of you for being here
    today.
        Mr. Clark, I will start with you. The LA City Attorney's
    efforts are very important here.
        Mr. Clark. Thank you, Senator.
        Chairman Shelby. I applaud your efforts on this case by, as
    you say it, engaging in good old-fashioned detective work. And
    I just want to clarify the facts as I understand them and for
    the record from your written testimony. Correct me if I am
    wrong.
        Mr. Clark. I will, Senator.
        Chairman Shelby. A dozen or so attorneys in your office,
    the LA City Attorney's Office, without subpoena power,
    conducted
    numerous interviews of former Wells Fargo employees, met with
    aggrieved victims, pored over public documents, including
    voluminous court records from wrongful termination lawsuits,
    searching for victims to uncover fraud. Is that correct?
        Mr. Clark. Yes, it is, Mr. Chairman.
        Chairman Shelby. Other than accessing the CFPB's consumer
    complaint database, your first contact with the CFPB or the
    OCC, Office of the Comptroller of the Currency, did not come
    until after your lawsuit was filed in May of 2015. Is that
    correct?
        Mr. Clark. That is correct.
        Chairman Shelby. Mr. Cordray, the CFPB's efforts, in your
    written testimony, sir, you state that Wells Fargo opened over
    1.5 million deposit accounts that may not have been authorized.
    That is a lot of accounts.
        Mr. Cordray. The facts we found through our investigation,
    yes.
        Chairman Shelby. Is that number based on Pricewater-
    houseCooper's analysis?
        Mr. Cordray. It is based on our investigation, and there
    were internal documents Wells Fargo provided that confirmed and
    were consistent with what we found through our investigation.
        Chairman Shelby. In your written testimony, you state that
    Wells Fargo also initiated applications for over 500,000 credit
    card accounts that may not have been authorized. Does that come
    from internal analysis?
        Mr. Cordray. These are staggering numbers. That is what we
    found through our investigation, which included civil
    investigative demands, disclosure of tremendous amounts of
    documents from Wells Fargo, investigative testimony, and
    working with our partners here and their staffs to uncover as
    much as we could.
        Chairman Shelby. Also in your written testimony, you
    describe your engagement with the Los Angeles City Attorney's
    Office--and you just a few minutes ago did--as a
    ``partnership.'' Prior to the filing of the City Attorney's
    lawsuit in May of 2015, did CFPB personnel accompany Mr.
    Clark's investigators as they did the following: conducted
    numerous interviews with former Wells Fargo employees, met with
    aggrieved victims, pored over public records, including court
    records from wrongful termination lawsuits by Wells Fargo? Did
    they?
        Mr. Cordray. So these investigations----
        Chairman Shelby. Or did you come later?
        Mr. Cordray. These investigations merged over time, work we
    were doing, work the OCC was doing, work the LA----
        Chairman Shelby. But they initiated the investigation, did
    they not?
        Mr. Cordray. Well, they initiated their investigation. We
    initiated our own efforts in our office.
        Chairman Shelby. After they----
        Mr. Cordray. No. No, we first heard about these problems in
    mid-2013 through whistleblower tips. The Los Angeles Times
    investigative series confirmed that there were issues in this
    industry. Now, there were different kinds of issues, and we
    were looking at financial incentive programs on a number of
    fronts at that time. We were dealing with credit card add-on
    deceptive marketing actions, which got back billions of dollars
    for consumers. We were looking at debt collection, where we
    ended up having the largest enforcement action against debt
    buyers and debt sellers.
        Chairman Shelby. Were you looking at Wells Fargo and other
    banks?
        Mr. Cordray. We have been looking at these problems in all
    of the banks and nonbank financial companies. Believe me, there
    has been a lot of problems to look at and a lot of problems to
    deal with. This is a fairly major one, and there have been
    other major ones. Our credit card add-on products work has led
    to billions of dollars in relief for consumers.
        Chairman Shelby. Is there anything that the Bureau has
    learned from the work that the LA City Attorney's Office did?
    Have you learned anything there?
        Mr. Cordray. So I think we learned from their investigation
    and they learned from our investigation. I do not want to speak
    too much of what other people did here, and I do not know that
    it matters. We do not sit around as partners and think about
    what percentage of the credit we should allocate to one
    another. We are looking to get a good result for consumers, and
    together we did that here. But they conducted various parts of
    the investigation. The OCC has conducted various parts of the
    investigation. We have conducted various parts of the
    investigation. We have been able to take this and turn it into
    nationwide relief for consumers, which the LA City Attorney's
    Office is unable to do under California law. And we and the OCC
    going forward will be active in working to clean it up here and
    across the industry.
        And let me say something specific here about whistleblower
    tips. We are getting a large and increasing number of
    whistleblower tips all the time. When a bank like Wells Fargo
    here does not come forward quickly with a problem that they
    recognize is occurring at their bank, they should not assume
    that we are not hearing about it from employees or customers or
    others. We probably are. So it makes sense for them to come
    forward more quickly and to self-report. That was not done
    here. It was a very late contact from Wells Fargo on this
    problem, as I see it.
        Chairman Shelby. Thank you.
        Senator Brown.
        Senator Brown. Thank you, Mr. Chairman. And thank you all
    for being here and for your public service, all of you.
        Following up on this self-report, Mr. Cordray, are banks
    required to report to you when they uncover fraud against
    customers in their own banks?
        Mr. Cordray. We think it is by far the best practice, and I
    know that the Comptroller would agree and we see eye to eye on
    this. We believe that----
        Senator Brown. A statutory requirement----
        Mr. Cordray. We believe that compliance at a bank starts
    with the bank. They should not expect us to come along and make
    sure they are complying with the law. They have that
    responsibility in the first instance to do it themselves, and
    our job is to make sure that they are doing it.
        Senator Brown. But no legal requirement? They have no legal
    requirement----
        Mr. Cordray. There is no legal requirement for them to
    report a problem, but they are in more trouble when they do
    not.
        Senator Brown. I understand.
        Mr. Curry, or for all three of you, and we will start with
    Mr. Curry. Your testimony states your agency started to receive
    customer and employee complaints about improper sales practices
    in early 2012. Mr. Cordray, your letter says your agency first
    learned about this from whistleblowers in mid-2013. You both
    heard Mr. Stumpf's answer to my question--I assume you were
    watching. You both heard Mr. Stumpf's answer to my question
    about when he learned. What does that say about the bank's
    governance and priorities? Mr. Curry, if you would start with
    that.
        Mr. Curry. Sure. Our supervisory activity really has
    focused historically--and this goes back to 2012--on the
    adequacy of their operational risk and compliance risk
    management systems. As our written testimony indicates, there
    have been repeated issues with the sufficiency of those systems
    and those controls, so this has been an ongoing issue.
        The sales practices issues that have been uncovered by the
    three agencies represented around this table are really a
    manifestation of the overall weaknesses in their risk
    management, particularly in the compliance area.
        Senator Brown. I remember a discussion we had, I believe
    soon after you took this position, about the importance of a
    risk officer in a bank and the role they should play, and as
    you pointed out, some do it better than others.
        Mr. Curry, part of OCC's supervisory activities began in
    2013. You would have been meeting with executives, and in my
    understanding, you would meet regularly with the bank's board.
    Correct?
        Mr. Curry. Our teams meet regularly with management and
    with the boards of directors, particularly the independent
    members of the board.
        Senator Brown. Not Mr. Stumpf, but those that are----
        Mr. Curry. Those who are independent from operating
    management.
        Senator Brown. And we just checked. The compensation of
    board members ranges from, I believe, the high 290s up to the
    $400,000 a year--again, making the contrast of the 90 percent
    of the employees who lost their jobs through various reasons,
    but acts they committed, you know, were not managers who were
    making under $35,000 or $40,000 a year.
        Does it strain credibility that neither the board nor Mr.
    Stumpf really knew this was going on, as it sounded like from
    the testimony today?
        Mr. Curry. I do not have personal knowledge what they knew
    or did not know, but our focus is in making sure that they have
    structures in place that facilitate the flow of important
    information about deficiencies in the complaint processing
    structure or in terms of escalating issues that arise in the
    compliance function or in the ordinary business of the bank.
        Senator Brown. Thank you. I found it particularly telling--
    and then, Mr. Clark, I would like your comments just on this
    whole area--that Mr. Stumpf said he met pretty much weekly,
    sometimes more often, with Ms. Tolstedt, and these issues
    apparently never came up until he learned about them in 2013
    and part from the three regulators--or three Government
    agencies. Mr. Clark?
        Mr. Clark. We do not know precisely, Senator Brown, exactly
    what they knew and when they knew it, but I think as a long-
    time trial lawyer, one can draw inferences like courts and
    lawyers do, and it is difficult to believe, based on the
    information we developed in our investigation, both before and
    after we filed our complaint, that knowledge of this did not
    extend far beyond the regional manager level.
        Senator Brown. Two more real quick questions of Mr. Curry
    and Mr. Cordray. Your agencies have the authority to make
    criminal referrals. Have you done so in this case? Is there
    anything you can tell us about actions in that way? Both of you
    answer that and then one more question.
        Mr. Curry. Generally, our position is to cooperate with
    criminal law enforcement. Our focus now at the conclusion of
    our supervisory activity is really to look at the civil
    enforcement remedies we have at our disposal. That would be
    personal cease and desist orders, civil money penalties against
    individuals, or removal or prohibition from banking, which
    would prohibit someone from serving in any capacity at a bank.
    That process is ongoing now.
        Senator Brown. Mr. Cordray?
        Mr. Cordray. So I have been told that I should not publicly
    acknowledge whether we have made criminal referrals or not.
    Thinking about this question, I thought there was something I
    think I can do without getting in trouble, which is quote our
    statute, 12 USC 5566. It says:

            If the Bureau obtains evidence that any person, domestic or
            foreign, has engaged in conduct that may constitute a violation
            of Federal criminal law, the Bureau shall transmit such
            evidence to the Attorney General of the United States, who may
            institute criminal proceedings under appropriate law.

    We follow that statute to the letter.
        Senator Brown. OK. Mr. Cordray, a last question. I
    mentioned that a group of Wells Fargo customers sought
    compensation for their fraudulent accounts in 2013, even before
    the Los Angeles Times series was published. Rather than
    accepting responsibility, Wells Fargo forced them into
    arbitration, effectively preventing them from being made whole.
    How would the CFPB's arbitration rule have helped Wells'
    customers in that case?
        Mr. Cordray. You know, I am not familiar with all the
    lawsuits, but my understanding is that these financial products
    typically did carry an arbitration clause. When that happens,
    as happened here, when there is massive wrongdoing on a wide
    scale but small amounts of harm to individual consumers, it
    would be very difficult to get any relief other than through a
    class action. And yet I believe an arbitration clause here
    might well defeat a class action. I think that is going to be
    litigated here, and courts will decide it. But they have often
    decided that it bars relief on an individual scale through a
    class action mechanism.
        Senator Brown. Thank you.
        Chairman Shelby. Senator Reed.
        Senator Reed. Well, thank you very much, Mr. Chairman, and
    thank you, gentlemen.
        Mr. Clark, you and your colleague did a superb job. Looking
    back, when you filed your complaint, were you anticipating
    extended litigation? Or was Wells Fargo cooperative from the
    very beginning about recognizing this problem and settling?
        Mr. Clark. It was interesting, Senator Reed. In the initial
    response the day after we filed, they said something to the
    effect of, ``We do not give our customers any accounts or
    services or products they do not need.'' They did not say in
    response to our complaint, ``We did not give Wells Fargo
    customers anything they did not ask for.'' That was pretty
    telling to us.
        We negotiated with Wells over a period of time. Ultimately,
    we were joined by our partners here before those negotiations
    were complete. But at the end, I think they cooperated in the
    sense that we ended up with what we believed to be a very
    robust series of reforms, the largest penalty in the history of
    our office. And because of the cooperation and working together
    with the other agencies here, those reforms and practice
    changes are nationwide.
        Senator Reed. With respect to the negotiations, is it your
    view that the added weight of OCC and the CFPB made a decisive
    difference in terms of the outcome as well as the speed?
        Mr. Clark. I cannot be sure of that, Senator, but I really
    believe that to be the case.
        Senator Reed. Thank you. There was one other aspect, too,
    of your testimony. You said that Wells Fargo made it difficult,
    if not impossible, for customers to receive accurate and clear
    information as to how accounts had been opened up, which
    suggests to me at least it was not just the individual ``bad
    apple'' but it was larger than that. Is it your sense that
    there was some type of either deliberate or negligent sort of
    treatment of customers that contributed to this and is liable
    at the company level?
        Mr. Clark. Yes, I do, Senator, in this sense: that
    customers would go into Wells Fargo's branches, would ask about
    accounts, they got their statements either electronically or on
    paper, could not figure out what was going on, and they just
    could not get clear answers. And because the practices were
    improper, in our view, the Wells employees in the experience of
    our witnesses were not willing to come forward, and they did
    not really give them honest answers. Sometimes, as I said in my
    oral testimony here, accounts were asked to be closed, they
    were supposed to be closed, and they were not closed.
        Senator Reed. Thank you.
        Mr. Curry, you point out that, you know, culture is key in
    any organization, and I think that is obvious. It seems that
    for years the culture at Wells Fargo was profit rather than
    customer satisfaction and customer service. Do you think that
    has changed? Or is that an accurate view of what is happening
    recently?
        Mr. Curry. This episode indicates how important it is, in
    fact. What we are looking for as a supervisor is to make sure
    that the institutions have a full understanding of the
    importance of culture, the reputational risk, and the financial
    consequences that can flow when you lose that reputation or
    engage in activity that calls into question the culture of the
    institution. And, again, our focus is making sure that they
    have the appropriate oversight structure. Incentives, incentive
    programs, compensation programs are
    something that we look at very closely in our heightened
    standards program because it does guide and dictate the culture
    of the
    institution.
        Senator Reed. One of the impressions that emerges, and I
    think not just for myself but across a wide spectrum of
    opinion, is that the company might have been whispering about
    ethical standards and treating the customer right, but they
    were shouting about this is the way you make money, sell more
    of these. Is that fair?
        Mr. Curry. I think that is possible, yes.
        Senator Reed. Director Cordray, the CFPB has been engaged
    in this effort and, again, with your partnership, I think has
    done an outstanding job. Protection of consumer laws is
    something that you are expert in. Working with the Comptroller,
    working with the city of Los Angeles, you brought special
    expertise. Can you describe the special expertise you brought
    to the issue?
        Mr. Cordray. Yes, I think we all bring a different
    expertise to this. The Los Angeles City Attorney's Office is
    working purely from an enforcement perspective. They brought a
    lawsuit. They are familiar with local conditions, which is
    tremendously valuable as we partner across the country, often
    with State Attorneys General or with State banking regulators,
    in some cases with local officials who are forward-leaning on
    consumer issues, like the LA City Attorney's Office.
        The OCC brings its deep knowledge of safety and soundness
    regulation at the institutions and under this Comptroller, I
    will say, an increasing attention and focus on consumer
    compliance and how safety and soundness actually affects the
    individual consumer, which has been a point of collaboration
    with the Bureau.
        I think what we bring to this is both a unique ability to
    engage not only in supervisory but also enforcement activity,
    and we do both frequently. The fact that we have separate laws
    that we can enforce here, including identifying abusive
    practices, which is alone an authority granted to this agency,
    that we also bring a consumer-focused perspective and market
    analysis and expertise and the ability to use our CID power
    aggressively even outside the scope of a lawsuit in order to
    get information and process that information. And I think we
    brought those tools to the table. Each of these other teams
    brought their tools to the table. Together it makes for a
    strong result.
        If you look back at our enforcement actions over our 5
    years, many of them have been done with partners; many of them,
    I can tell you, almost all of them have been more effective for
    doing that. Sometimes it takes a little longer because working
    back and forth with other offices takes certain procedures and
    other things to get into place. But it is always the best
    answer if we can do it well. And people did it well here.
        Senator Reed. Thank you very much.
        Chairman Shelby. Senator Menendez.
        Senator Menendez. Thank you, Mr. Chairman. Thank you all
    for your service and the work that you have done here.
        Director Cordray, the subject of today's hearing is, in my
    mind, the ultimate affirmation of your agency and its
    employees. In the wake of the 2008-09 financial crisis, when
    unfair and abusive practices ran rampant in the industry, I
    know that as a Member of the Committee at the time, one of the
    things that I wanted to ensure that we did in the Wall Street
    reform legislation, and to fight tooth and nail to get it, is
    to empower a cop on the beat that would be on the side of
    consumers. And I must say you as the Director and your Bureau
    and agency have lived up to every bit of those expectations
    from my point of view.
        Now, I hope to use this as a teaching moment for some of my
    colleagues that are not aware of the Bureau's latest list of
    accomplishments. I would point out that since its creation in
    2011, the Bureau has recovered and sent back nearly $12 billion
    to 27 million consumers harmed by illegal practices of credit
    card companies, banks, debt collectors, mortgage lenders, and
    others--$12 billion to 27 million consumers.
        And it is amazing that, despite all of those
    accomplishments, my Republican colleagues are hell bent on
    killing this agency. Just three legislative days after the
    announcement of the settlement of Wells Fargo, one of my
    Republican colleagues introduced and the Majority Leader,
    Senator McConnell, fast-tracked a bill that would fundamentally
    alter the funding mechanism for the Bureau and subject it to
    the annual appropriation process.
        So in view of that, can you tell me, Director, what would
    it mean for the Bureau to be subject to the annual
    appropriation process vis-a-vis the work that you are doing?
        Mr. Cordray. Let me start in a general sense, which is what
    we can see here is there is a very big job to be done to change
    the culture and practices at the banks. It does not happen
    overnight. This is on top of the robosigning mortgage servicing
    scandal. It is on top of the mortgage origination scandals that
    led to the financial crisis. It will take considerable time for
    us to root out all of these things in the financial
    institutions, banks as well as nonbanks.
        But if we can remain on the job, if we can continue to
    exert our authorities in matters like this, if we can continue
    to work with our partners across the country, we will continue
    to make progress.
        Senator Menendez. I appreciate that. What happens if you
    are put on the annual appropriation process?
        Mr. Cordray. Well, it would compromise our independence and
    make it harder for us to do our job, just as it is for all the
    banking agencies.
        Senator Menendez. Now, if the bill were to become law--and
    trust me when I tell you that we will not let it--how might it
    undermine the Bureau's efforts to protect consumers from
    unfair, deceptive, and abusive practices?
        Mr. Cordray. Again, anything that is attempting or
    seeking--and some of these efforts are--to compromise our
    independence will make it harder for us to do our job.
        Senator Menendez. Now, let me ask all three of you, do any
    of you disagree--and if so, please explain to me why--that in
    essence here at Wells Fargo what we had was a pressure cooker
    environment with perverse incentives and a culture that
    ultimately led to the type of wrongdoing that took place? Does
    anybody disagree with that view?
        Mr. Cordray. Not at all.
        Mr. Curry. No.
        Mr. Clark. No.
        Mr. Cordray. In fact, they sent mixed messages at best if
    they countervailed that culture at all.
        Senator Menendez. Now, Mr. Curry, let me ask you, do you
    believe that you--meaning the Comptroller's office--should have
    been notified earlier than what you were notified by Wells
    Fargo?
        Mr. Curry. It is critically important that there be open
    and frank disclosure of relevant information by a bank with our
    examiners. It is not entirely clear at what point that occurred
    here, and----
        Senator Menendez. Is it fair to say that this is a
    material--what happened here is a material event as it relates
    to----
        Mr. Curry. I think there is always difficulty when you try
    to define a term like ``material,'' depending on the context. I
    would say from the OCC's standpoint and the facts of this
    particular case, the fact that 5,300 employees were terminated
    was material, and that there were 2 million accounts involved,
    that would be material.
        Senator Menendez. Let me ask you, did you--go ahead,
    Director Cordray.
        Mr. Cordray. There was something in the earlier testimony
    that bothered me, which was an acknowledgment that the bank
    alerted the OCC in 2013 but did not alert the CFPB until 2015.
    We had known about these types of problems from our own
    sources, but if any institution feels that they can divide and
    conquer among the regulators, they should know that that is a
    mistake.
        Senator Menendez. Let me ask you this: How widespread is
    the issue of cross-selling, at least in the perverse way that
    it took place at Wells Fargo? Do you have any sense whether
    this is a one-off, or is this an industry-wide concern?
        Mr. Curry. Our view is--and I mentioned this in my
    testimony--we generally look at incentive compensation at an
    institution. With what we have seen here at Wells Fargo, I have
    directed that we do a horizontal review, so we will be looking
    specifically at sales practices at our largest banks and mid-
    sized banks.
        Senator Menendez. I look forward to you informing us on
    that.
        Mr. Cordray. I agree with the Comptroller on that. We will
    be doing joint action on that. I would say the incentive
    compensation has been a problem we have seen across a number of
    different markets, so it is a broader issue. As to cross-
    selling, Wells Fargo Bank no doubt was the industry leader in
    aggressively cross-selling products, which led in part to the
    extreme circumstances we find here. But to the extent others
    are engaged in it, you should be focused on customer
    satisfaction not on bare numbers, and there are monitoring
    systems that can be put in place.
        I agree with something the Comptroller said earlier, which
    is we are all going to look back on this and think more about
    what we can do to make sure that the cultures are changing at
    these banks. We need to do some rethinking ourselves and, as
    always, learn from new events.
        Senator Menendez. Last, to Mr. Curry and then Mr. Clark, in
    reading the OCC's consent order, I am struck by the group of
    orders attempting to remedy what appears to be a longstanding
    gross deficiency in the bank's risk management governance
    structure and oversight protocols. For an institution with
    $1.85 trillion in total consolidated assets, I am incredibly
    concerned about the bank's ability to identify and manage risk
    across its various lines of business.
        At what point do you think Wells Fargo executives should
    have been aware of these deficiencies? And how far back do you
    think these risk management deficiencies go? And then
    separately for you, Mr. Clark--and I would like to hear both
    your answers, and I will rest there--I read with interest the
    complaint that your office filed where you said--the complaint
    says, ``Managers consistently hound, berate, demean, and
    threaten employees to meet these unreachable quotas.'' And
    where you talked about Wells Fargo gaming the practice of
    targeting individuals holding Mexican consular cards, I assume
    that when you made those assertions, they were based upon the
    factual evidence that you discovered in the course of your
    investigation.
        Mr. Curry, could you speak to what I asked you? And, Mr.
    Clark, to you.
        Mr. Curry. Our testimony, which discusses our supervisory
    history, demonstrates that there has been a significant period
    where we have identified weaknesses in their operational risk
    and compliance risk management. What we have attempted to do
    with Wells Fargo is to address those weaknesses that have been
    identified through our matters requiring attention that was
    escalated after we conducted our heightened standards review to
    be Part 30 of the Compliance Plan, which is an enforceable
    requirement under our safety and soundness guidelines.
    Ultimately the weaknesses that we saw in their safety and
    soundness program resulted in the enforcement action that we
    had. And that is a significant and major tool at our disposal
    for institutional weaknesses in their programs.
        Mr. Clark. Senator Menendez, let me answer your second
    question first, and that is, we based our allegations on 16
    months' worth of work. It was public documents, witness
    interviews, former employees, every source we could come to--
    again, lacking pre-filing subpoena power.
        As to how they could have known, some of the documents we
    looked at were wrongful termination lawsuits. They described
    this kind of conduct, for example, in St. Helena, which is part
    of our Napa Valley wine country, as early as 2009.
        Senator Menendez. Thank you.
        Chairman Shelby. Senator Warren.
        Senator Warren. Thank you, Mr. Chairman.
        So buried in the fine print of Wells Fargo's checking and
    credit card contracts is a forced arbitration clause. It says
    that if a customer has any dispute with the bank about anything
    related to that checking account or that credit card, then they
    have to--they cannot go to court, and they cannot join with
    other customers who have the same problem. Instead, they have
    to go one by one through arbitration.
        Now, a feature of arbitration that the banks particularly
    love is that it is nearly always all secret. Filings and
    documents are not available, and even if the customer wins,
    there is no public record of it like there would be if we were
    in a court case.
        Director Cordray, do you think forced arbitration clauses
    make it easier for big banks to cover up patterns of abusive
    conduct, including the years of misconduct by Wells Fargo in
    this case?
        Mr. Cordray. I do think so, yes.
        Senator Warren. So, in other words, these forced
    arbitration clauses make it easier for Wells to get away with
    scamming their customers, which is why it is good news for
    customers that the CFPB has proposed strong new rules that
    would ban forced arbitration clauses that prevent customers
    from joining together to bring a public action in court. And I
    think this is just one more way. We are talking here about the
    CFPB's Enforcement Division, which I am very glad that we are
    doing, and that is powerfully
    important. But you get better rules in place, and this kind of
    fraud gets exposed much earlier. If we had had class actions on
    this back in 2010, 2009, 2008, then the problem never would
    have gotten so out of hand. So I think that is really
    important. Please.
        Mr. Cordray. There is another sort of somewhat related
    indicator here that shows you the focus on these things. One of
    the first things that Wells Fargo did in the LA City action
    that was brought was aggressively seek a protective order to
    keep the proceedings, as much as possible, from public view.
        Senator Warren. That is right, trying to keep it all
    secret, and that is what the arbitration clause does that they
    put in these contracts: everything out of public view for as
    long as humanly
    possible.
        I also want to hit another point about how you make
    structural change, because I think that is so important here.
    Mr. Clark, I want to thank you for your testimony today and for
    the great work that your office has undertaken in this case.
        Mr. Clark. Thank you, Senator.
        Senator Warren. One of the really powerful things that the
    CFPB has done is to create a new complaint hotline which allows
    customers to register complaints against any financial product.
    We will just put it in the record. You can go to CFPB.gov and
    file a complaint online, right? Anyone can do this. And since
    its inception, the agency has fielded nearly a million
    complaints. Is that right, Director Cordray?
        Mr. Cordray. It is going to be a million later this week.
        Senator Warren. All right. We are almost there. We will
    have to mark the occasion.
        Mr. Cordray. I think Thursday.
        Senator Warren. And one of the best parts about this is not
    just that you fielded the complaints, it is that you made them
    public, and you made them searchable online. And that allows
    everyone from researchers and academics to law enforcement
    authorities to the banks themselves to be able to spot growing
    problems and then to address them.
        So, Mr. Clark, I wanted to ask, in the process of
    conducting your investigation into Wells Fargo, did you use the
    CFPB's complaint database?
        Mr. Clark. Yes, we did.
        Senator Warren. Good. And it was helpful to you?
        Mr. Clark. Very helpful, as was the FTC's Sentinel
    database.
        Senator Warren. Excellent. I am very glad to hear that. You
    know, this is yet another way that the consumer agency is
    protecting customers and holding banks accountable. It is
    bringing a lot more transparency to the market, which helps
    identify banks that are consistently harming their customers.
    And just as important, it rewards the banks that are doing a
    good job for their customers. You know, there must be a lot of
    community bank presidents who are standing by watching this
    hearing saying, ``We do not engage in this kind of behavior.
    You will not find those kind of complaints against us in the
    CFPB database. Move your accounts over where you can actually
    trust your banker.''
        In light of all of the great CFPB work in investigating
    this case and everyone working together on this, from the
    arbitration rule to the complaint database to stop this kind of
    scam from happening again, because that is the part we really
    want to make sure we focus on, I think you are sending a very
    loud message to the banks that--and a loud message to my
    Republican colleagues who continue to attack the agency. You
    know, Wells Fargo may wish that the CFPB would disappear, and
    some Republicans may keep trying to leash up this watchdog. But
    that is not going to happen. Thank you.
        Thank you, Mr. Chairman.
        Chairman Shelby. Thank you.
        Senator Merkley.
        Senator Merkley. Thank you. Earlier I mentioned several of
    the features that came out of interviews with employees of the
    high-pressure environment, employees who were given daily
    quotas for ``daily solutions,'' that is, sales of accounts,
    that they had to stay late or come in on weekends if they did
    not meet them, high-pressure sales meetings, bonuses that were
    tied to meeting those threats of being put on probation or
    being fired because they did not meet those quotas, in some
    cases managers conducting coaching sessions on how to meet the
    quotas through creating these accounts, regional sales meetings
    conducted on an hourly basis to keep checking in.
        In this whole structure that was established in the Wells
    Fargo culture of how to do intensive cross-sales, was this a
    high-pressure sales culture for the people who were the
    personal bankers and the tellers? Just each of you, your
    opinion on that.
        Mr. Curry. Yes, that is really what we were addressing in
    our supervisory letter from June of 2015. Those were all
    deficiencies.
        Senator Merkley. Thank you. Do both of you agree with that?
        Mr. Cordray. Yes. If I could just elaborate? It was
    excruciatingly high pressure in various settings. When you
    first start to hear about something like this, it takes some
    time to untangle conflicting accounts, and there are different
    pieces of this. There were some different angles on it.
        One issue was whether employees themselves were being
    abused, and that was part of the complaints that people were
    seeing.
        Another issue was whether they were pressuring consumers to
    open accounts, ultimately getting their consent but pressuring
    them into improper or not suitable accounts.
        And then the third, which sort of emerged a little later,
    was potentially they were just opening accounts without
    consumers even knowing about it. It is the third thing we are
    focusing on here, but it takes some time to bring this into
    focus as you conduct an investigation.
        Senator Merkley. Thank you.
        Mr. Clark, Director Cordray described it as
    ``excruciatingly high pressure.'' Does that fit your
    impression?
        Mr. Clark. It does, Senator. Let me tell you a quick
    anecdote. I am a Wells Fargo customer. I was in my bank on
    Friday doing a transaction. The senior person there recognized
    me, asked me about this, and said, ``You cannot believe, Jim,
    what the pressure was like. It was excruciating. I am so glad I
    am out of that now because I am in a different kind of bank.''
    This was on Friday, and he told me this. I found that
    extraordinary, Senator.
        Senator Merkley. So just a few moments ago, when I was
    asking the CEO of Wells Fargo about the establishment of this
    high-pressure situation that left bank tellers and personal
    bankers in a no-win, between a rock and a hard place position,
    he denied that there was any such structure. Is that completely
    inconsistent with your complete understanding of the situation?
        Mr. Curry. Senator, again, I would go back to our June 2015
    supervisory letter in which we found that the program was
    deficient.
        Senator Merkley. And, Mr. Curry, that is a nice way of
    saying ``yes.'' Yes, OK.
        Mr. Cordray. It does differ from my understanding of the
    situation that we found in our investigation.
        Senator Merkley. So why after this extensive public review
    of the establishment of this high-pressure culture, why would
    the CEO, after working with you all and having these various
    letters and so forth, after paying a fine, come in here and
    say, ``No such thing existed. These were just individual
    employees who had ethical lapses''? Why possibly did we hear
    that testimony today?
        Mr. Cordray. I do not know.
        Mr. Clark. I do not either, Senator.
        Senator Merkley. Any insight, Mr. Curry
        Mr. Curry. No. It is inconsistent with our findings.
        Senator Merkley. OK. It is inconsistent with everything. Is
    it because the bank is trying to insulate itself from lawsuits?
        Mr. Curry. I would not speculate. I do not know.
        Senator Merkley. Is it possibly because the top executives
    who were in charge during this whole period want to have kind
    of no responsibility, claim no responsibility, and instead it
    is just those 5,000 low-level people who had nothing to do with
    the system they set up to sell?
        Mr. Clark. I think there is responsibility here, that we
    have a consent order with the OCC, with the CFPB, and with the
    city of Los Angeles.
        Senator Merkley. I would like to enter into the record,
    ``Banking on the Hard Sell,'' an article from the National
    Employment Law Project.
        Chairman Shelby. Without objection, so ordered.
        Senator Merkley. It lays out these high-pressure cultures
    that have happened in many financial retail banking groups. And
    I think when the question was asked earlier, Mr. Curry, you
    noted that that is something you will horizontally be looking
    into. But do any of you have some impression based on what you
    have seen so far that these practices, at least maybe not to
    the same degree, but these high-sale practices, high-pressure
    practices, did result in similar creation of fake accounts or
    adding things to customers they did not ask for?
        Mr. Curry. That really will be the focus on our horizontal
    review. Banks are under enormous margin pressure, and that
    could be----
        Senator Merkley. That could be the case.
        Mr. Cordray. I would just say that, for example, we started
    with our first deceptive marketing of credit card add-on
    enforcement action, many of which we took jointly with the OCC.
    That eventually mushroomed into 12 enforcement actions across
    the industry. The practice was worth billions of dollars. We
    will certainly follow up aggressively here.
        Senator Merkley. I have had the experience of opening an
    account in partnership with--going to the bank with my
    daughter, and it was very clearly--we went through it: ``This
    is a no-fee account for a student, right?'' ``Yes, right,
    right, right.'' Then the paperwork comes, and it is a fee
    account.
        And I had another case where I opened an account, and I
    said, ``I do not want the overdraft protection or the fee that
    goes with that. I want the free account.'' ``Yes, yes,
    absolutely.'' Got the paperwork. Funny thing, I had the fee
    account.
        And I just thought it was sloppy paperwork. I had no idea
    until now that there was a hard-sell system of quotas that was
    causing folks to basically slam me with stuff that I had
    explicitly said I did not want. And that was not at Wells
    Fargo, so I will just say that I suspect that you will find
    lots of this activity elsewhere.
        Turning to Sarbanes-Oxley, where a CEO must sign off on the
    sufficiency of internal audits, clearly from this hearing the
    conduct was relevant to a bank's reputation and, therefore, to
    its--certainly of material interest to its investors. Should
    the SEC launch an investigation of this in terms of those
    Sarbanes-Oxley reports?
        Mr. Cordray. I will leave that to the SEC.
        Senator Merkley. OK. And, finally, in the settlement, Wells
    Fargo was allowed to neither admit nor deny wrongdoing, and we
    heard today the result. The head of the bank comes in here and
    says, ``We did not do anything. It is just a bunch of bad
    apples who were ethically misguided.'' And it bothers me. Was
    that debated and wrestled with? And why was Wells Fargo allowed
    to not admit wrongdoing?
        Mr. Cordray. So here is my point of view on that, Senator.
    The order speaks for itself. It is very detailed. It tells the
    facts as we established them through our investigation. That is
    the story. People can quibble with it if they want, but that is
    the story. It is the story that is forming vigorous public
    scrutiny going forward and potentially other investigations by
    other public officials, which we will be welcoming and
    assisting in any way we can.
        Senator Merkley. Does it not make it harder, though, to
    hold the managers accountable to the board of directors of a
    company when they have not admitted any wrongdoing?
        Mr. Cordray. I think actions speak louder than words. The
    notion that nothing happened here but they fired 5,300 people,
    those things cannot possibly be squared.
        Mr. Clark. I also think, Senator, that we wanted to get
    relief to consumers as quickly as we could. It is very
    typical--I practiced law at a big law firm for 35 years--for
    these non-admissions to be part of an agreement. It would have
    taken years to litigate this case, at least from our
    perspective. And we would not have gotten relief for consumers.
    We thought the consumers needed to get relief now, and the
    practices had to stop. And so that is one reason from our
    perspective it went that way.
        Senator Merkley. I do applaud all of that, but I have got
    to say from the men and women on the street perspective, it is
    enormously frustrating to see the people at the bottom be fired
    from their jobs, be threatened with firing, forced into an
    untenable situation, and see the managers take no
    responsibility. They take their bonuses. They are not clawed
    back. They keep their jobs.
        Let me take--and I will just close with this, Mr. Chairman.
    The manager of this unit who worked to establish this very
    successful--I say ``successful'' from the cross-selling
    profitability--system that produced these fraudulent activities
    is walking away--you can call it a bonus or you can call it a
    platinum parachute or you can call it money she has already
    earned, which is what we have heard, but more than $100
    million, not counting what came previously. It would take a
    bank worker earning $25,000 a year--and that is roughly in the
    ball park because a lot of these workers were paid $11 to $12
    an hour. At $25,000 a year, it would take them 4,000 years to
    earn that $100 million. Four thousand years. Or to put it
    differently, 100 lifetimes working 40 years. It is a phenomenal
    distinction, and that managers are taking home those kinds of
    profits from developing a system that destroyed so many
    consumers and affected so many of their own employees by
    putting them in an impossible situation, it is wrong, it is
    ugly, it is criminal. There should be accountability for the
    managers.
        Thank you.
        Chairman Shelby. Thank you, Senator Merkley.
        We appreciate your appearance today. It has been a lengthy
    hearing. Maybe this is the beginning of a lot of things, but a
    lot of us are worried about that perhaps there are similar
    doings going on in other banks. We hope not. As I have said
    from the beginning, banking should be based on integrity, on
    trust. I think you would agree with me on that.
        Mr. Curry. We do.
        Chairman Shelby. And most banks have that, but some do not.
        Thank you. The hearing is adjourned.
        [Whereupon, at 1:49 p.m., the hearing was adjourned.]
        [Prepared statements, responses to written questions, and
    additional material supplied for the record follow:]
                       PREPARED STATEMENT OF JOHN STUMPF
            Chairman and Chief Executive Officer, Wells Fargo & Co.
                               September 20, 2016
        Chairman Shelby, Ranking Member Brown, and Members of the
    Committee, thank you for inviting me to be with you today.
        I am the Chairman and Chief Executive Officer of Wells Fargo, where
    I have worked for nearly 35 years. It is my privilege to lead the
    company, which was founded 164 years ago and has played a vital role in
    the financial history and development of our country. Today, we are
    part of so many people's lives. We employ more than 268,000 team
    members, 95 percent of whom are in the United States. One in every 600
    working adults is a member of the Wells Fargo team, and we have a
    presence in all 50 States.
        I am deeply sorry that we failed to fulfill our responsibility to
    our customers, to our team members, and to the American public. I have
    been with Wells Fargo through many challenges, none that pains me more
    than the one we will discuss this morning. I am here to discuss how
    accounts were opened and products were provided to customers that they
    did not authorize or want. I am going to explain this morning what
    happened and what we have done about it. But first, I want to apologize
    to all Wells Fargo customers. I want to apologize for violating the
    trust our customers have invested in Wells Fargo. And I want to
    apologize for not doing more sooner to address the causes of this
    unacceptable activity.
        I do want to make very clear that there was no orchestrated effort,
    or scheme as some have called it, by the company. We never directed nor
    wanted our employees, whom we refer to as team members, to provide
    products and services to customers they did not want or need. It is
    important to understand that when an employee provides a customer with
    a product or service that she did not request or authorize, that
    employee has done something flat wrong. It costs us satisfied
    customers, and we lose money on these accounts. Wrongful sales practice
    behavior goes entirely against our values, ethics, and culture and runs
    counter to our business strategy of helping our customers succeed
    financially and deepening our relationship with those customers.
        That said, I accept full responsibility for all unethical sales
    practices in our retail banking business, and I am fully committed to
    doing everything possible to fix this issue, strengthen our culture,
    and take the necessary actions to restore our customers' trust.
        Let me assure you and our customers that Wells Fargo takes
    allegations of sales practice violations extremely seriously and that
    we will not rest until the problem is fixed. As I will explain shortly,
    we are moving to demonstrate once again that Wells Fargo remains the
    dependable, principled partner that it has been throughout its 164-year
    history.
        I will first provide some context around our business strategy of
    serving customers; discuss some of the changes we have made to address
    the problems we uncovered; discuss the terminations about which you
    have read; and describe further efforts to strengthen our controls and
    make things right for customers.
    Cross Selling Means Deepening Relationships With Customers
        A typical American household has multiple financial services and
    products, and our goal is to have as deep a relationship as we can with
    those households. Our cross-sell strategy is simply another way of
    saying that we provide our customers a wide variety of products that
    can satisfy their financial needs. The more products a customer uses,
    the deeper the relationship of trust and value. Deep relationships with
    products that are wanted and used are what furthers our business
    strategy and truly helps our customers to succeed financially.
    Retail Banking Has Made Progressive Changes To Detect and Deter
            Unethical
            Behavior
        Our efforts to detect and deter unethical conduct have
    progressively evolved over the last 5 years. They were put in place out
    of concerns that some employees were not doing what was right for
    customers and were providing products to customers they did not want.
    For example, in 2011, we piloted our Quality-of-Sale Report Card in
    California, and it was implemented in 2012 across retail banking. The
    Quality-of-Sale Report Card was designed to, among other things, deter
    and detect misconduct through monitoring of sales patterns that may
    correlate with unethical
    behavior.
        In 2011, a dedicated team (now called the Sales and Service Conduct
    Oversight Team) began to engage in proactive monitoring of data
    analytics, specifically for the purpose of rooting out sales practice
    violations.
        In addition, during 2012, Wells Fargo began to reduce the number of
    sales that team members would need to meet to qualify for incentive
    compensation. Between 2012 and 2015, we steadily reduced sales goals by
    up to 30 percent for branch-based team members.
        Along with the reduction in sales goals in 2013, we introduced an
    expanded set of training materials for our managers, which managers use
    to train bankers on ethical practices and prohibited conduct. Further,
    in the first quarter of 2013, we incorporated the Quality-of-Sale
    Report Card into the incentive compensation plan for our retail banking
    district managers.
        Starting in 2013, we further strengthened our oversight of
    potential sales integrity issues and revised our performance evaluation
    system to put less emphasis on sales goals. These revisions were made
    to enable bankers to earn acceptable ratings on their performance
    evaluations, even if they did not meet their sales goals.
        In 2013, the Sales and Service Conduct Oversight Team began its
    first proactive analysis of ``simulated funding'' across the retail
    banking business, reviewing employee-level data around account
    openings. Let me explain: ``simulated funding'' is a prohibited
    practice whereby an employee creates an account for a customer and then
    funds it in order to make it look as if the customer had funded the
    account. Based on the original proactive monitoring, our Internal
    Investigations team began an intensive investigation into simulated
    funding activity in the Los Angeles and Orange County markets. As a
    result of these investigations, we terminated team members for sales
    integrity issues.
    Retail Banking, In Conjunction With Enterprise Risk, Expanded Oversight
            From 2013 to 2015
        Further improvements in our sales practice oversight continued in
    2013-2015, following the terminations in California that occurred and
    were reported by the media.
        In 2013, we created a new cross-functional oversight team for
    retail banking sales integrity issues comprised of representatives from
    our Sales and Services Conduct Oversight Team, Corporate
    Investigations, Human Resources, Employee Relations, and the Law
    Department. The purpose of this team was to identify trends around
    sales integrity issues, and to identify any additional improvements in
    the process that would enhance our oversight of sales integrity issues,
    with a goal of preventing future violations.
        In 2013 and 2014, we made several changes to our incentive
    compensation plans to better align incentive pay with ethical
    performance, and we further restructured how we went about setting
    goals in our bank branches.
        In 2014, the Sales and Service Conduct Oversight Team expanded the
    simulated funding review to a national scope.
        In 2015, we continued to enhance our training materials and
    practices, continued to make changes to incentive plans, and
    substantially lowered incentive compensation goals for new team
    members.
    Sales-Related Terminations Took Place Over the Course of 2011-2015
        I want to pause for a moment to discuss the issue of terminations.
    We do not have tolerance for dishonest conduct or behavior inconsistent
    with our Code of Ethics. It has been reported in the media that Wells
    Fargo terminated approximately 5,300 individuals after the CFPB's
    enforcement investigation. Instead, individuals were terminated over
    time for sales-related misconduct as a result of investigations opened
    from January 1, 2011 through March 7, 2016. In any given year,
    approximately 100,000 individuals work in our retail bank branches, and
    we have terminated approximately 1 percent of that workforce annually
    for sales practice
    violations.
    Wells Fargo Is Working To Make it Right for Our Customers
        Despite all of these efforts, we did not get it right. We should
    have done more sooner to eliminate unethical conduct and unintended
    incentives for that conduct to occur. Even one unauthorized account is
    one too many. We should have addressed earlier the possibility that
    customers could be charged fees in connection with accounts opened
    without their authorization. Because deposit accounts that are not used
    are automatically closed, we assumed this could not happen. We were
    wrong.
        In August 2015, we began working with a third-party consulting
    firm, PricewaterhouseCoopers (``PwC''), and asked them to evaluate
    deposit products,
    unsecured credit cards, and other services from 2011-2015 to determine
    whether customers may have incurred financial harm (specifically, fees,
    other bank charges, and interest) from having been provided an account
    or service they may not have
    requested. Our charge to PwC was clear--using our account records for
    our products and services, employ data analytics to determine who may
    have suffered financial harm as a result of an account that may not
    have been authorized, and to quantify what that financial harm might
    have been.
        I want to highlight that our direction to PwC was to err on the
    side of the customer and to be over-inclusive in attempting to identify
    a population of customers that may have suffered financial harm. In
    other words, if it could not be ruled out that a deposit account or
    credit card was unauthorized, we designated those accounts for further
    analysis. We made available to PwC any records they needed.
    Beginning in September 2015 and continuing well into 2016, PwC
    conducted extensive large-scale data analysis of the more than 82
    million deposit accounts and nearly 11 million credit card accounts
    that we opened during that timeframe.
        With respect to deposit accounts, PwC focused on identifying
    transaction patterns that might be consistent with improper conduct.
    Out of the 82 million deposit accounts, it identified approximately 1.5
    million such accounts (or 1.9 percent) that could have been
    unauthorized. To be clear, PwC did not find that each of these accounts
    was unauthorized. Among these accounts, PwC calculated that
    approximately 100,000 incurred fees in the amount of about $2.2
    million.
        With respect to credit cards, PwC identified a population of credit
    cards that had never been activated by the customer nor had other
    customer transaction activity. By itself, the lack of activation and
    use by a customer does not mean that the customer had not authorized
    the card to begin with. We know that some customers will request a
    credit card for many reasons, including for emergencies and other
    reasons, but then they may not activate the card. However, because we
    could not confirm, based on account activity, that the customer
    authorized the account in the first place, we elected to consider these
    accounts for potential remediation. PwC calculated that approximately
    565,000 consumer cards, or 5.8 percent of all credit cards opened, had
    not been activated nor had other customer transaction activity, and
    approximately 14,000 of these cards had incurred a fee. These fees
    totaled approximately $400,000. PwC did not find that these cards were
    unauthorized.
        In February 2016, we began the process of remediating the deposit
    and credit card customers identified above. For existing customers, we
    credited their accounts. For former customers, we sent a check. All
    customers received a letter informing them that they were receiving a
    refund as a result of fees that may have arisen from an account they
    may not have authorized. We were transparent with our customers and
    provided them contact information to discuss the matter further with
    us.
    Wells Fargo Is Engaged in Multiple Efforts To Take Responsibility for,
            and Rectify, Our Mistakes
        We decided that product sales goals do not belong in our retail
    banking business. Specifically, as announced last week, we are
    eliminating all product sales goals for retail banking team members and
    leaders, including those in branches and retail banking call centers,
    effective January 1, 2017. We are doing this in order to better align
    with the additional training, controls, and oversight implemented since
    2011 and focus on rewarding excellent customer service rather than
    product sales.
        We have taken, and continue to take, other significant and
    meaningful steps to prevent unauthorized accounts from being created.
    These steps include:

        Working closely with our primary regulator, the Office of
            the Comptroller of the Currency (``OCC''), to strengthen our
            enterprise oversight of sales conduct risk. We have established
            an enterprise Sales Conduct Risk Oversight Office, reporting
            into the Chief Risk Officer, and have regularly responded to
            numerous inquiries and provided regular briefings to our
            regulators;

        Creating a new enhanced branch compliance program that will
            be dedicated to monitoring for sales practice violations by
            conducting data analytics and frequent branch visits. Results
            will be reported to the enterprise Sales Conduct Risk Oversight
            Office;

        Implementing a process whereby, within 1 hour of opening an
            account, a customer will receive an email that confirms the
            opening of the account;

        Revising procedures for credit cards, to require each
            applicant's documented consent before a credit report is
            pulled. Consent is manifested by a physical signature or, if
            the applicant is unable to sign on the PIN pad, by a dual
            attestation of the banker and the manager or branch designee;
            and

        To further address possible customer harm, we are
            contacting all customers with open, inactive credit cards to
            confirm whether the customer authorized the account. If the
            customer indicates they did not authorize the card, we will
            offer to close it (if it is still active) and suppress any
            bureau inquiry.

        I will close by saying, again, how deeply sorry I am that we failed
    to live up to our expectations and yours. I also want to take this
    opportunity to thank our 268,000 team members who come to work every
    day to serve our customers. Today, I am making a personal commitment to
    rebuild our customers' and investors' trust, the faith of our team
    members, and the confidence of the American people.
                                     ______

                     PREPARED STATEMENT OF MICHAEL N. FEUER
                           Los Angeles City Attorney
                               September 20, 2016
        Chairman Shelby, Ranking Member Brown, esteemed Members of the
    Committee, thank you for the opportunity to provide testimony on this
    critical matter.
        On a Sunday morning in December, 2013, I was appalled when I opened
    the Los Angeles Times and read an investigative story by Scott Reckard
    regarding Wells Fargo Bank's sales culture. The story read in part,
    ``To meet quotas, employees have opened unneeded accounts for
    customers, ordered credit cards without customers' permission and
    forged client signatures on paperwork. Some employees begged family
    members to open ghost accounts.''
        I immediately instructed my staff to investigate to determine if
    the facts warranted our Office filing an action pursuant to California
    laws that protect consumers against, and provide relief for, unfair
    business practices.
        Because these laws do not afford my Office pre-litigation subpoena
    power, our investigation consisted of good old-fashioned detective
    work. We conducted numerous interviews with former Wells Fargo
    employees and Wells Fargo consumers, pored over public records,
    including voluminous court records from wrongful termination lawsuits
    former employees filed against Wells Fargo, and made use of the
    consumer complaint databases of the Consumer Financial Protection
    Bureau and the Federal Trade Commission.
        We found that the Bank victimized consumers by opening customer
    accounts, and issuing credit cards and other products, without
    authorization. Further, we found that the Bank failed to notify
    customers that these accounts had been opened without their consent and
    failed to refund fees incurred by those customers for these unwanted
    products and services. We found instances in which the Bank made it
    difficult, if not impossible, for customers to receive accurate and
    clear information as to how this happened. Many were told that the
    unauthorized accounts would be closed, only to find later that they
    were not.
        We found that Wells Fargo's business model imposed unrealistic
    sales quotas that, among other things, incentivized employees to engage
    in highly aggressive sales practices, creating the conditions for
    unlawful activity, including opening fee-generating customer accounts,
    and adding unwanted secondary accounts and products, without customer
    permission.
        Underlying all of this egregious conduct, we found a fundamental
    breach of trust by the Bank through its misuse of consumers' personal
    information. We sought to enforce the Bank's obligation to inform its
    customers that their personal and private information had been accessed
    by Wells Fargo in order to open unauthorized
    accounts.
        Our 16-month investigation culminated in our May 4, 2015, filing of
    a civil enforcement action in the name of the People of the State of
    California, an action that both sought relief for consumers harmed by
    Wells Fargo's conduct and to end the illegal practices Wells Fargo
    employed.
        In the days following the filing of our lawsuit, my Office received
    calls, letters, and emails from over 1,000 current and former Wells
    Fargo customers and employees. Customers described their experiences,
    including having money withdrawn from their authorized accounts to pay
    fees assessed by Wells Fargo on unauthorized
    accounts. They also complained that their unauthorized accounts were
    sent to debt collection agencies, and derogatory notes were placed on
    their credit reports.
        Let's be clear what's at stake:

        It's outrageous for a bank to use a customer's private
            information for any unauthorized purpose, but especially to
            enhance the bank's bottom line to the detriment of those with
            whom it holds a position of trust.

        It's outrageous for a bank to open unwanted accounts, and
            then to transfer funds, without consent, from that customer's
            existing account to fund an unauthorized account.

        And it's outrageous for a customer to incur unexpected fees
            or other negative consequences from the bank's conduct.

        Earlier this month, we reached a settlement with Wells Fargo,
    which, in concert with the settlements reached by the Federal
    regulatory agencies, provides for
    comprehensive retrospective and prospective remediation and corrective
    actions, and sends a strong message by imposing a $50 million penalty.
    Our agreement contains important protections for consumers. It
    establishes a complaint and mediation system for California consumers
    harmed by the Bank's practices, and requires Wells Fargo to continue a
    restitution program for affected customers. Wells Fargo must also alert
    all its California customers who have consumer or small business
    checking or savings accounts, credit cards, or unsecured lines of
    credit, that they should visit their local bank, or call Wells Fargo,
    to review their accounts, close accounts or discontinue services they
    do not recognize or want, and resolve any remaining problems.
    Additionally, every 6 months for the next 2 years, Wells Fargo must
    provide my Office an audit report assessing the Bank's compliance with
    our agreement, verified under penalty of perjury by an officer or
    director of the Bank.
        We coordinated our settlement with the enforcement efforts of our
    Federal partners, the Consumer Financial Protection Bureau and the
    Office of the Comptroller of the Currency. As a result of this
    collaboration, remediation and corrective actions extend nationwide. I
    would like to thank both agencies for their incredible work.
    Robust government oversight is key to protecting consumers and it is
    important to maintain laws that are protective of consumers and support
    collaboration between Federal, State, and local enforcement agencies.
        There is a sacred trust that consumers put in their financial
    institutions--a faith that their hard-earned money will be safe and
    secure, and that their banks' actions will be in the best interests of
    customers like themselves. Wells Fargo broke that trust. We should all
    work to assure it never happens again.
                                     ______

                     PREPARED STATEMENT OF THOMAS J. CURRY
                   Comptroller, Comptroller of the Currency *
    ---------------------------------------------------------------------------
         * Statement Required by 12 U.S.C.  250:

         The views expressed herein are those of the Office of the
    Comptroller of the Currency and do not necessarily represent the views
    of the President.
    ---------------------------------------------------------------------------
                               September 20, 2016
    I. Introduction
        Chairman Shelby, Ranking Member Brown, and Members of the
    Committee, thank you for the opportunity to testify today as the
    Committee reviews matters relating to certain sales practices at Wells
    Fargo Bank, N.A. (Bank or Wells Fargo). As described below, the Office
    of the Comptroller of the Currency (OCC) recently took public
    enforcement actions against Wells Fargo, finding that the Bank engaged
    in reckless unsafe or unsound banking practices and directing it to
    take comprehensive corrective action with regard to risk management of
    its sales practices, reimburse harmed customers, and pay $35 million in
    civil money penalties (CMPs). The OCC's actions focused on safety and
    soundness issues, and we worked in close coordination with the Consumer
    Financial Protection Bureau (CFPB) and the Los Angeles City Attorney. I
    want to express my appreciation to Director Cordray of the CFPB and LA
    City Attorney Mike Feuer.
        While the OCC continues to review our supervision and actions
    related to this case, my testimony provides additional detail, known
    today, regarding our supervisory response and the steps the OCC is
    taking to review our actions in this matter, as we continuously work to
    enhance our supervision of national banks and Federal savings
    associations.
        Before discussing the details of our supervisory response, I want
    to make clear that the unsafe and unsound sales practices at the Bank,
    including the opening and manipulation of fee-generating customer
    accounts without the customer's authorization, are completely
    unacceptable and have no place in the Federal banking system. They
    reflect a lack of effective risk management, a breakdown in controls,
    and an inappropriate incentive structure. The actions announced on
    September 8, 2016, are intended to remediate and deter such practices
    and underscore the importance of robust risk management throughout the
    Federal banking system. The coordinated and complementary efforts by
    the OCC and the CFPB make clear to regulated institutions that
    compliance and safety and soundness go hand in hand.
        The actions against the institution hold it accountable, and
    consistent with our practice in such enforcement matters, the OCC has
    also initiated a review of individual misconduct and culpability. The
    OCC may take formal enforcement actions against institution-affiliated
    parties, including directors, officers, and employees, who violate any
    law or regulation, engage in unsafe or unsound practices, or breach
    fiduciary duty. These actions include personal cease and desist orders
    and CMPs. In addition, the OCC has the authority to remove and prohibit
    individuals from serving as directors, officers, or employees of
    federally insured depository institutions if the legal standards for
    such action are met. Removal and prohibition amount to a lifetime ban
    on the culpable individual working in the banking
    industry.
        While I believe we have made progress since the financial crisis in
    fostering healthier cultures at the largest institutions, meaning a
    commitment to compliance with applicable laws, effective risk
    management, good governance, and fair treatment of customers, there is
    clearly more work to do. Regulators and the institutions themselves
    must be especially vigilant when it comes to practices that can
    undermine the trust and confidence in financial institutions.
    II. OCC Supervision of the Bank's Sales Practices
        The OCC charters, regulates, and supervises national banks, Federal
    savings associations, and the Federal branches and agencies of foreign
    banks. Our mission is to ensure these institutions operate in a safe
    and sound manner, provide fair access to financial services, treat
    customers fairly, and comply with applicable laws and regulations.
    Compliance with consumer protection laws is dependent upon a bank's
    ability to manage operational risk and conduct its business in a safe
    and sound manner, and the opposite is also true: You cannot manage
    operational risk without an effective compliance program.
        OCC-regulated institutions are subject to comprehensive, ongoing
    supervision designed to enable examiners to identify problems and
    obtain corrective action. Such supervision permits most bank problems
    to be resolved through the supervisory process without formal
    enforcement action. Relevant examples of written supervisory actions
    include comprehensive Reports of Examination, Supervisory Letters, and
    Matters Requiring Attention (MRAs) tailored to the specific weaknesses
    existing at a bank.\1\ MRAs focus the bank management's and board's
    attention on supervisory concerns that require the board's immediate
    acknowledgment and oversight to ensure timely corrective action. In
    financial institutions with more than $10 billion in assets, such as
    Wells Fargo, the OCC's supervisory responsibilities are related to, and
    sometimes overlap with, the supervisory responsibilities of the CFPB
    for financial institution activities subject to certain consumer
    financial laws and regulations, including retail sales practices.
    Pursuant to a 2012 interagency memorandum of understanding (MOU) on
    supervisory coordination, the OCC's regular practice in these areas is
    to provide the CFPB with copies of Reports of Examination and formal
    supervisory correspondence. The OCC also shares other material
    supervisory information with the CFPB pursuant to that MOU and a
    subsequent statement of principles between the two agencies.
    ---------------------------------------------------------------------------
        \1\ MRAs describe practices that deviate from sound governance,
    internal control, and risk management principles, and have the
    potential to adversely affect the bank's condition, including its
    financial performance or risk profile, if not addressed; or result in
    substantive noncompliance with laws and regulations, enforcement
    actions, supervisory guidance, or conditions imposed in writing in
    connection with the approval of any application by the bank. The OCC
    clarified its use of MRAs in 2014 (http://www.occ.gov/news-issuances/
    bulletins/2014/bulletin-2014-52.html).
    ---------------------------------------------------------------------------
        In March 2012, the OCC received a small number of complaints from
    consumers and Bank employees alleging improper sales practices at Wells
    Fargo, which were forwarded to OCC supervision staff assigned to the
    Bank, consistent with agency practice at the time. Following these
    inquiries and a Los Angeles Times article \2\ in December 2013
    regarding the Bank's aggressive sales practices, the examiners
    initiated a series of meetings with various levels of Bank management,
    including executive leadership, to evaluate the Bank's activities and
    actions. The Bank stated that it terminated employees as a result of
    consumer and internal ethics complaints, and that it was investigating
    such reports and re-evaluating its oversight of sales practices at the
    Bank. During this time, the OCC examiners were also reviewing, and
    meeting with the Bank to discuss, the Bank's development of a corporate
    risk strategy, risk framework, and implementation plan that included
    its sales practices.
    ---------------------------------------------------------------------------
        \2\ See ``Wells Fargo's Pressure-Cooker Sales Culture Comes at a
    Cost.'' Los Angeles Times, Dec. 22, 2013 (http://www.latimes.com/
    business/la-fi-wells-fargo-sale-pressure-20131222-story.html).
    ---------------------------------------------------------------------------
        Between January 2012 and July 2016, the OCC conducted multiple
    supervisory activities related to Wells Fargo, which included ongoing
    supervision and targeted examinations through which examiners assessed
    the Bank's governance and risk management practices related to
    compliance and operational risk. These activities included assessments
    of compliance with the OCC's heightened standards requirements that I
    discuss further below, as well as other regulatory expectations for
    compliance risk management. These activities also included components
    that involved assessment of risk management related to sales practices.
    The supervisory conclusions associated with these activities are
    summarized below.
    2011-2014 Examination Activity
    Consumer Compliance Risk Management Assessment
        Following earlier examination work relating to consumer practices
    at the Bank that began in late 2011, the OCC took further supervisory
    actions related to compliance risk management at the Bank in early 2013
    and 2014. In February 2013, the OCC issued a Supervisory Letter \3\
    requiring the Bank to develop its operational risk compliance program.
    In early 2014, the agency directed the Bank to address weaknesses in
    compliance risk through the establishment of a comprehensive compliance
    risk management program related to unfair and deceptive practices.
    Further, the OCC identified the need to assess cross-selling and sales
    practices as part of its upcoming examination of the Bank's governance
    processes. Examiner planning for that examination included meetings
    with Bank management throughout 2014, as well as the review of the
    Bank's management information systems, internal audit findings, and
    documents describing the Bank's efforts to improve its capabilities to
    manage and monitor the quality of compliance oversight. OCC examiners
    continued their dialogue with Bank management to supervise and monitor
    these efforts.
    ---------------------------------------------------------------------------
        \3\ A Supervisory Letter to a large bank such as Wells Fargo is an
    official OCC communication that formally conveys supervisory findings
    and conclusions, including any supervisory concerns, from the OCC's
    ongoing supervision of the institution.
    ---------------------------------------------------------------------------
    2015 Examination Activity
    Compliance Management Reviewed Under Heightened Standards
        The OCC's ongoing review and supervisory response to the matters
    discussed above continued into 2015, and included periodic meetings
    with Bank management and review of extensive documentation, including
    internal reports, board packages, and internal audit findings. In March
    2015, OCC examiners completed a multi-year assessment of the Bank's
    compliance management systems, applying the OCC's rule on heightened
    standards for large banks that took effect in November 2014,\4\ and
    identified the need for the Bank to improve its risk management and
    governance related to operational and compliance risk.
    ---------------------------------------------------------------------------
        \4\ See OCC Bulletin 2014-45, ``Heightened Standards for Large
    Banks; Integration of 12 CFR 30 and 12 CFR 170.'' Sept. 25, 2014
    (http://www.occ.gov/news-issuances/bulletins/2014/bulletin-2014-
    45.html).
    ---------------------------------------------------------------------------
    Community Bank Operational Risk Management Reviewed
        The OCC conducted an examination of the Bank's Community Bank
    Operational Risk Management in February 2015. The review focused on
    governance of operational risk, use of risk tools, implementation of
    strategic plans and new products, internal loss oversight, complaints
    management processes, and sufficiency and quality of staff. The
    examiners also evaluated the Community Bank division's sales practices
    oversight. The examiners' conclusions noted that the Bank lacked a
    formalized governance framework to oversee sales practices and thus,
    the OCC issued a Supervisory Letter in April 2015 that included an MRA
    requiring the Bank to address the governance of sales practices within
    its Community Bank division.
    Enterprise Sales Practices Reviewed
        The OCC issued an additional Supervisory Letter to the Chairman and
    Chief Executive Officer in June 2015 identifying matters related to the
    Bank's enterprise-wide risk management and oversight of its sales
    practices that required corrective action by the Bank. The OCC letter
    included five MRAs that required the Bank to take significant action to
    address the inappropriate tone at the top, that included the lack of an
    appropriate control or oversight structure given corporate emphasis on
    product sales and cross-selling; the lack of an enterprise-wide sales
    practices oversight program; the lack of an effective enterprise-wide
    customer complaint process; the lack of a formalized governance process
    to oversee sales practices and effectively oversee and test branch
    sales practices; and the failure of the Bank's audit services to
    identify the above issues or to aggregate sales practice issues into an
    enterprise view.
        The June 2015 Supervisory Letter also instructed the Bank to take
    certain corrective actions to address the practices at issue, including
    improving processes to manage sales practices risk; re-evaluating
    compensation and incentive plans to ensure they did not provide an
    incentive for inappropriate behavior; improving processes to
    independently oversee sales practices risk at an enterprise-wide level;
    accelerating the implementation of a fully effective customer complaint
    process and
    establishing policy and processes for evaluating complaints related to
    protected classes; having management of the Bank's Community Bank
    division establish effective oversight, as well as a testing and
    quality assurance function, to review branch sales practices; and
    having the Bank's audit services develop an enterprise-wide risk
    management process for sales practices. The OCC also instructed the
    Bank to remediate any consumer harm that resulted from the sales
    practices at issue.
        As part of the corrective actions required by the June 2015
    Supervisory Letter, the OCC also ordered the Bank to retain an
    independent consultant to conduct a thorough review of the Bank's
    approach to enterprise-wide sales practices and to assess consumer
    harm. The Bank retained two consultants--one to review the practices
    and another to assess consumer harm. The consultants issued their
    findings in October 2015, February 2016, and May 2016. The consultants'
    work and findings further informed OCC's ongoing supervision and
    consideration of the matter.
    2015 Report of Examination Issued
        The OCC issued its annual Report of Examination in July 2015 and
    noted the Bank needed to act more proactively to control compliance and
    operational risk. The July Report of Examination was followed by a
    Notice of Deficiency on July 28 citing the Bank's failure to comply
    with the safety and soundness expectations in the OCC's heightened
    standards rule. The OCC issued this notice to help ensure that Bank
    management adhered on a timely basis to its plan to implement an
    effective enterprise-wide compliance risk management program.
    2016 Examination Activity
    2016 Report of Examination Issued and Supervisory Letter Finding Unsafe
            or Unsound Practices
        The OCC continued its ongoing review of these matters into 2016,
    holding monthly meetings with Bank management in order to monitor and
    follow up on the Bank's progress in addressing the corrective actions
    required by the OCC. The OCC concluded its 2016 examination work in
    July, and issued its Report of Examination findings and a letter to the
    board. The Report of Examination communicated the findings and
    conclusions that the Bank's sales practices were unethical; the Bank's
    actions caused harm to consumers; and Bank management had not responded
    promptly to address these issues. A Supervisory Letter to the Bank's
    Chairman on July 18, 2016, also stated the Bank engaged in unsafe or
    unsound banking practices and shortly thereafter, the OCC's Major
    Matters Supervision Review Committee approved recommendations to issue
    the Consent Order and assess CMPs against the Bank for reckless unsafe
    or unsound sales practices and the Bank's risk management and oversight
    of those practices.
    Enforcement Actions
        The OCC's enforcement actions were coordinated closely with the
    CFPB and the LA City Attorney and issued on September 8, 2016.\5\ Many
    of the elements of the cease and desist order reflect requirements
    included in the various OCC supervisory communications discussed above,
    which were issued as part of the OCC's ongoing supervision prior to
    issuance of the order.
    ---------------------------------------------------------------------------
        \5\ See NR 2016-106. ``OCC Assesses Penalty Against Wells Fargo,
    Orders Restitution for Unsafe or Unsound Sales Practices.'' Sept. 8,
    2016 (http://www.occ.gov/news-issuances/news-releases/2016/nr-occ-2016-
    106.html).
    ---------------------------------------------------------------------------
        The September 2016 OCC enforcement actions included the assessment
    of $35 million in CMPs, and required the Bank to make restitution to
    customers who were harmed by the Bank's unsafe or unsound sales
    practices and to develop a comprehensive enterprise-wide action plan to
    address the underlying causes of the harm. The Bank was also required
    to conduct a comprehensive assessment of any new or materially revised
    incentive compensation structure in its sales practices prior to
    implementation. Such an assessment is intended to ensure that the risks
    related to the Bank's incentive compensation structure are well
    managed, controlled, and adhere to policies, procedures, and processes
    designed to prevent potentially unsafe or unsound sales practices.
        Restitution payments made by the Bank to customers pursuant to the
    OCC's order will also satisfy identical obligations required by the
    CFPB and the LA City Attorney.
    III. Next Steps
        While the OCC has made many improvements to our supervisory program
    in recent years, the actions against Wells Fargo highlight that we must
    continue our efforts to improve and refine the agency's supervisory
    program, to sharpen our early warning processes, and to enhance our
    supervisory capabilities, particularly with respect to our largest,
    most complex banks. And while the examination and investigation needed
    to bring comprehensive and coordinated enforcement action against Wells
    Fargo required deliberation and care, it is critically important that
    the OCC identify issues and act more quickly. To that end, I have asked
    the Senior Deputy Comptroller for Enterprise Governance to conduct a
    review of our actions taken in this matter in order to identify gaps in
    our supervision and assess any lessons the agency can learn from it.
        At the same time, I have directed our examiners to review the sales
    practices of all the large and midsize banks the OCC supervises and
    assess the sufficiency of controls with respect to these practices.
    IV. Enhancements to the OCC's Supervisory Programs
        Since I began my term as Comptroller in April 2012, I have sought
    to strengthen the OCC's supervisory programs. The enhancements
    described below have put the agency on track to act in a more timely
    and effective manner to address unsafe and unsound practices and
    violations of law.
    Heightened Standards
        The financial crisis showed that supervisory expectations for front
    line units, risk management, internal audit, and corporate governance
    in our largest and most complex banks needed to be substantially
    higher, especially for the most systemically important institutions. To
    achieve that goal, the OCC developed a set of ``heightened
    expectations.'' Starting in 2010, the agency introduced these
    expectations to the large banks we supervise. By 2012, the OCC began
    assessing compliance with the expectations, and incorporated our
    findings into our risk assessments of those institutions. We found that
    progress was too slow and that a more robust approach, providing for
    the possibility of an enforceable response, was needed. Thus, in
    January 2014, the OCC proposed enforceable guidelines and, in September
    2014, issued final enforceable guidelines. Under this approach, if a
    bank fails to satisfy a standard in the guidelines, the OCC may require
    it to submit a compliance plan detailing how it will correct the
    deficiencies and the applicable timeline. The OCC can issue an
    enforceable order if the bank fails to submit an acceptable compliance
    plan or fails in any material way to comply with an OCC-approved plan.
        The heightened standards guidelines have two major components. The
    first sets forth the minimum standards for the design and
    implementation of a covered bank's risk governance framework,
    stipulating that it should be based on what the industry commonly
    refers to as the three lines of defense: front line units, independent
    risk management, and internal audit. The risk governance framework and
    the three lines of defense are intended to ensure that the bank has an
    effective system to identify, measure, monitor, and control risk-taking
    and standards of behavior. Those units must ensure that boards of
    directors have enough information on their bank's risk profiles and
    risk management practices so that the bank operates within the risk
    appetite established by management and the board.
        The second component of our heightened standards guidelines
    pertains to the responsibilities of boards of directors. The guidelines
    establish criteria to ensure that bank boards have a minimum number of
    independent directors and that all board members have the information
    they need to provide effective oversight, including the ability to pose
    a credible challenge to management. The guidelines also require each
    bank to establish and maintain an ongoing training program for all
    board members and to conduct an annual self-assessment of the board's
    effectiveness in meeting the standards in the guidelines. The date for
    the largest banks to comply with these standards was in November 2014.
    Major Matters Supervision Review Committee
        As Comptroller, I established a committee comprised of my most
    senior and expert executives to review major supervisory matters. The
    committee operates independently of the supervision function and
    replaces a less robust review and decisionmaking process previously in
    place for significant enforcement cases, thereby strengthening and
    enhancing the governance over decisionmaking.
        The Committee's role is to ensure OCC bank supervision and
    enforcement policies are applied fairly, effectively, and consistently.
    The Committee considers all major enforcement cases, and its charter
    recently was expanded as the Committee has added value to the OCC's
    supervisory program. The matters that must be brought before the
    Committee include all enforcement actions against large banks (informal
    and formal) based on safety and soundness; all large bank enforcement
    actions that include articles addressing the Bank Secrecy Act (BSA);
    all enforcement actions against any bank based in whole or in part on
    unfair or deceptive acts or practices in violation of section 5 of the
    Federal Trade Commission Act; and certain fair
    lending referrals and actions. The Committee's charter also requires
    vetting by senior executives on the Committee of decisions made outside
    of the Committee not to pursue enforcement actions that would otherwise
    come before the Committee.
    Compliance and Community Affairs (CCA)
        Earlier this year, I established Compliance and Community Affairs
    (CCA), a new business unit within the OCC's organizational structure.
    CCA, led by a Senior Deputy Comptroller, is separate from the existing
    supervisory units and is charged with addressing all aspects of
    compliance and community affairs. The assignment of these
    responsibilities to one unit avoids the risk of a fragmented approach
    to these issues and inconsistent outcomes among different OCC
    supervisory lines of business. The establishment of the CCA unit
    reflects the significance of consumer and BSA/anti-money laundering
    compliance issues within the OCC and the banking industry, and the
    extent to which compliance risk management deficiencies may pose the
    risk of great harm to consumers and the safety and soundness of banks.
    The need for ongoing communication and effective collaboration with a
    wide range of other regulatory agencies in these areas also contributed
    to my decision to establish the CCA unit. By establishing this unit
    with both supervision and policy functions, I recognized the need for a
    change in the OCC's organizational structure to provide the best
    possible platform and support for this work throughout the agency.
    Fairness and compliance are critical aspects of the OCC's mission and
    are interconnected with, and as important as, safety and soundness. As
    I noted earlier, compliance and safety and soundness go hand in hand.
    The compliance discipline, like its safety and soundness sibling,
    requires dedicated staff and strong infrastructure to ensure the OCC
    takes timely and appropriate actions with respect to compliance and
    related safety and soundness issues.
    Coordination Principles
        The enforcement action against Wells Fargo follows other
    coordinated enforcement actions we have issued with the CFPB since
    2012. The actions have included significant consumer restitution as
    well as penalties assessed by the OCC and the CFPB against institutions
    that were found to have engaged in unfair billing practices and
    deceptive sales and marketing practices, among other issues. However,
    our coordination is not limited to enforcement actions. In June of this
    year, the OCC and the CFPB jointly issued a set of 10 coordination
    principles to guide how the staffs of the two agencies collaborate and
    share information. The principles build on the 2012 interagency MOU on
    supervisory coordination that I noted earlier and a 2012 interagency
    MOU on information sharing, and reflect how closely the two agencies
    work together to ensure that our country's financial services industry
    meets the needs of consumers, communities, and businesses. Key to the
    principles and the underlying coordination is that OCC and CFPB
    employees should be responsive and share information; communicate
    openly with each other; consult with each other especially when working
    on a joint project; elevate to management issues of importance;
    coordinate on approaches to their work; and respect the goals and
    mission of each agency.
    V. Additional Actions Required
        It is clear from our work and the actions announced on September 8
    against the Bank that the misaligned priorities and unacceptable
    behavior at Wells Fargo
    resulted in unsafe and unsound practices that led to widespread
    consumer harm. Issues of incentive compensation are relevant to
    ensuring behavior aligns with acceptable corporate practice. For those
    reasons, the OCC strongly supports issuing a final rule on incentive
    compensation that would address some of the issues I am raising today.
        The OCC, along with the Federal Reserve, Federal Deposit Insurance
    Corporation, the Securities and Exchange Commission, the Federal
    Housing Finance Agency, and the National Credit Union Administration,
    issued a proposed rule on incentive-based compensation earlier this
    year that would apply to financial institutions with total consolidated
    assets of $1 billion or more. The proposed rule would prohibit
    incentive-based compensation arrangements that provide excessive
    compensation and that could lead to material financial loss to a
    financial institution. A financial institution covered by the proposed
    rule would not be permitted to provide an incentive-based compensation
    arrangement unless the arrangement appropriately balanced risk and
    reward, was compatible with effective risk management and controls, and
    was supported by effective governance.
        The proposed rule also includes specific requirements for
    incentive-based compensation arrangements at the largest financial
    institutions, like Wells Fargo, with total consolidated assets of $50
    billion or more. The most notable of these is the requirement that
    larger financial institutions defer a certain percentage (40-60
    percent) of the incentive-based compensation they pay to certain senior
    executive officers and significant risk-takers for a minimum period of
    time (1 to 4 years). Those deferred amounts would be subject to a
    forfeiture review by the financial institution if certain triggering
    events, such as a material risk management or control failure,
    occurred. Incentive-based compensation paid to these employees would
    also be subject to claw back for 7 years. Additionally, the proposed
    rule would prohibit larger financial institutions from providing
    incentive-based compensation based solely on transaction volume or
    revenue, without regard to transaction quality or compliance with sound
    risk management.
        Further, the proposed rule includes risk management requirements,
    including an independent compliance program and independent monitoring
    of incentive-based compensation plans and programs. The comment period
    for the proposed rule closed on July 22, 2016. The agencies are
    carefully reviewing the comments that we received and are working
    toward completion of a final rule. I strongly supported the proposed
    rule,\6\ and while the content of the final rule will not be determined
    until it is considered by the agencies' principals, I also strongly
    support completing the work as quickly as practical.
    ---------------------------------------------------------------------------
        \6\ See NR 2016-46, ``Comptroller Statement Regarding the Proposed
    Incentive-Based Compensation Rule.'' Apr. 26, 2016 (http://www.occ.gov/
    news-issuances/news-releases/2016/nr-occ-2016-49.html).
    ---------------------------------------------------------------------------
    VI. Conclusion
        I remain committed to ensuring the OCC completes its review of this
    matter and takes additional actions to hold the bank and individuals
    accountable as warranted. Moreover, I will work to foster continuous
    improvements at the OCC to fulfill our mission. I want to close by
    expressing my appreciation again for my colleagues at the CFPB and in
    the LA City Attorney's office. Our Nation's financial services industry
    is complex and dynamic. Effective supervision and enforcement requires
    regulators to work together to achieve a safe and sound banking system
    that treats customers fairly. I look forward to continued collaboration
    with my fellow
    regulators.
                                     ______

                     PREPARED STATEMENT OF RICHARD CORDRAY
                 Director, Consumer Financial Protection Bureau
                               September 20, 2016
        Chairman Shelby, Ranking Member Brown, and Members of the
    Committee, thank you for the opportunity to speak with you today. In
    these brief remarks, I will discuss: (1) what our investigation found
    about the sales practices at Wells Fargo; (2) what we are seeking to
    achieve by our Order; and (3) some initial thoughts about what further
    steps need to be taken to improve the culture and practices of the
    banking industry. On September 8, 2016, the Consumer Bureau, together
    with our partners at the Los Angeles City Attorney's office and the
    Office of the Comptroller of the Currency, took an enforcement action
    against Wells Fargo Bank. Our investigations found that, in order to
    meet sales goals and collect financial bonuses for themselves,
    employees of the bank created unauthorized deposit and credit card
    accounts, enrolled consumers in online banking services, and ordered
    debit cards for consumers, all without their consent or even their
    knowledge. Some of these practices involved fake email accounts and
    phony PIN numbers.
        The fraudulent conduct occurred on a massive scale. As detailed in
    our Order, Wells Fargo opened 1,534,280 deposit accounts that may not
    have been authorized, including transferring funds from some customer
    accounts without their knowledge or consent. Wells Fargo also initiated
    applications for 565,443 credit card accounts that may not have been
    authorized, by using consumers' information without their knowledge or
    consent. These activities caused some consumers to incur fees. Even
    apart from that, they represent a staggering breach of trust and
    conduct that should never occur at any bank. Wells Fargo has
    demonstrated the epic scope of its failures by terminating at least
    5,300 people thus far, including branch managers and managers of
    managers.
        The gravity and breadth of the fraud that occurred at Wells Fargo
    cannot be pushed aside as the stray misconduct of just a few bad
    apples. As one former Federal prosecutor has aptly noted, the stunning
    nature and scale of these practices reflects instead the consequences
    of a diseased orchard. As our Order describes, Wells Fargo built and
    refined an incentive compensation program and implemented sales goals
    to boost the cross-selling of products, but did so in a way that made
    it possible for its employees to pursue unfair and abusive sales
    practices. It appears that the bank did not monitor the program
    carefully, allowing thousands of employees to game the system and
    inflate their sales figures to meet their sales targets and claim
    higher bonuses. Rather than put its customers first, Wells Fargo built
    and sustained a program where the bank and many of its employees served
    themselves instead, violating the basic ethics of a banking
    institution, including the key norm of trust.
        Our Order accomplishes several things. First, the kind of detail
    that we always make it a point to provide in our enforcement orders
    exposes Wells Fargo's illegal misconduct, including its scale, for all
    to see for themselves. It has spawned vigorous public scrutiny over the
    past 2 weeks that no doubt will continue.
        Second, the Order helps answer one question that many of you have
    asked me from time to time: what does the term ``abusive'' mean in our
    governing statute? Although we have been careful in analyzing all the
    ramifications of that new term, we did not hesitate for one minute to
    apply it emphatically to what we found here. In this matter, Wells
    Fargo engaged in abusive conduct toward its customers and consumers. We
    have said so, and executives, shareholders, and investors throughout
    the financial system will now have to consider what that means in their
    efforts to address their own cultures and practices going forward.
        Third, we have ensured that all consumers who suffered financial
    harm as a result of these practices will be fully compensated for that
    harm. Wells Fargo is required to set aside $5 million to cover all of
    that, and if it turns out to exceed $5 million, the bank will cover
    that as well.
        Fourth, we levied upon Wells Fargo a fine of $100 million, the
    largest fine by far that the Consumer Bureau has imposed on any
    financial company to date. Some have said it should have been higher,
    others have said it should have been lower. All told, the bank will pay
    $185 million in fines for the illegal actions of these
    employees. That is a dramatic amount as compared to the actual
    financial harm to consumers, but it is justified here by the outrageous
    and abusive nature of these fraudulent practices on such an enormous
    scale. As for whether we have done enough here, it is notable that the
    Order is generating considerable consequences, including market
    effects, shareholder activity, further potential lawsuits, and follow-
    up investigations by other public officials that may be either civil or
    criminal in
    nature.
        Fifth, the Order requires independent consultants to be installed
    at Wells Fargo to complete all further work on this matter, to ensure
    that all consumers are fully compensated, and to ensure that changes in
    the bank's sales practices are fully implemented to ensure that these
    types of misconduct do not recur. Both the top executives at Wells
    Fargo and its board of directors will be directly engaged in this work.
    If the independent consultants identify any further issues or concerns,
    we will address those as well.
        Let me conclude with some more general concerns. As one of the
    biggest and best known banks in the United States, Wells Fargo is in a
    position to lead by example in terms of how every bank should treat its
    customers. In the wake of this Order, it now must do so. Much bank
    growth these days occurs by cross-selling customers on more products
    and services. This approach should lead banks to focus on strong
    customer service that produces high levels of customer satisfaction,
    which in turn should generate repeat business from existing customers
    and positive word of mouth to others.
        As we have seen here, however, unchecked incentives and an
    unrealistic and uncaring culture of high-pressure sales targets can
    lead to serious consumer harm. Incentive compensation structures are
    common in businesses and they can motivate positive behavior. Yet
    companies need to pay close attention to their compliance monitoring
    systems in order to prevent violations of the law and abusive
    practices.
        This action should serve notice to the entire industry. If sales
    targets and incentive compensation schemes are implemented in ways that
    threaten harm to consumers and lead to violations of the law, then
    banks and other financial companies will be held accountable. We have
    seen the risk that such programs pose to consumers across the entire
    financial sector--in debt collection, mortgage origination, credit card
    add-on products, overdraft products, and now in this action. Any such
    initiatives should be carefully monitored as a basic element in a
    company's compliance program.
        Thank you again to our partners here at this table who worked with
    us on this important enforcement action. And thank you for this
    opportunity to testify. I will be happy to answer your questions.

        RESPONSES TO WRITTEN QUESTIONS OF SENATORS BROWN, REED,
     SCHUMER, MENENDEZ, TESTER, WARNER, MERKLEY, WARREN, HEITKAMP
                    AND DONNELLY FROM JOHN G. STUMPF

    Q.1. As was requested of you at the hearing, what is the
    precise date in 2013 when you became aware of these issues in
    the Community Banking Division? How was this information
    conveyed to you, and by whom?

    A.1. It is our understanding that, from time to time, because
    of Mr. Stumpf's position, individuals would contact him
    directly and complain about issues and that Mr. Stumpf did
    receive complaints about sales-practice issues over the years.
    When Mr. Stumpf received such complaints, our understanding is
    that his practice was to forward them to the appropriate
    internal team, such as Human Resources, to address.
        Mr. Stumpf has said that he recalls learning of the
    increase in the number of reports of sales-practice issues in
    late 2013.
        Please note that the Independent Directors of Wells Fargo's
    Board of Directors have launched an investigation into sales-
    practice issues, and that investigation is ongoing.

    Q.2. As was asked at the hearing, what is the precise date when
    the board of directors became aware? How was this information
    conveyed to the board, and by whom? Please provide a list of
    the dates of the board meetings when this matter was discussed,
    as well as which board members were in attendance at these
    meetings.

    Q.3. At the hearing, you were asked whether any board members
    or executives had fraudulent accounts opened in their names.
    Please provide any names and titles.

    A.2.-A.3. From at least 2011 forward, the board's Audit and
    Examination Committee received periodic reports on the
    activities of Wells Fargo's Internal Investigations group
    (which investigates issues involving team members), as well as
    information on EthicsLine and suspicious activity reporting.
    Among other things, several of those reports discussed
    increases in sales integrity issues or in notifications to law
    enforcement in part relating to the uptick in sales integrity
    issues. Some reporting discussed reasons for increases in sales
    integrity investigations and reporting, which
    included improved controls, tightening existing controls, and
    enhancements to better facilitate referrals of potential sales
    integrity violations to Internal Investigations.
        Later, the Risk Committee began to receive reports from
    management of noteworthy risk issues, which included, among
    other risks, sales conduct and practice issues affecting
    customers and management's efforts to address those risks. The
    board's Human Resources Committee also received reports from
    management that it was monitoring sales integrity in Community
    Banking. Sales integrity issues also were discussed
    periodically with the board.

    Q.4. At the hearing, you stated that you did not learn of the
    systemic fraud occurring at Wells Fargo until late 2013, after
    interventions at lower levels of the company had failed to stem
    the creation of fraudulent accounts. Please provide a detailed
    timeline, from 2007 to 2015, of when different segments of
    Wells Fargo learned that employees were creating fraudulent
    accounts and what actions those segments took to address the
    problem, including which Wells Fargo employees (such as senior
    executives) and Federal and State regulators they informed of
    the problem.

    A.4. Prior to the summer of 2011, it was Wells Fargo's practice
    to address individual instances of alleged unauthorized
    accounts as they were brought to its attention by customers or
    bank team members. In 2012, the task of dealing with such
    complaints was assigned to the risk management function within
    Community Banking, which initiated a number of efforts to
    proactively monitor sales-integrity issues--which might include
    unauthorized accounts, but might also involve opening accounts
    that are a poor fit for the customer. This monitoring included
    tracking metrics such as how many accounts were funded within
    the first 30 days, how many accounts were closed within the
    first 30 days after opening, and how frequently accounts were
    downgraded from a higher value account type to a lower value
    account type. In April 2012, a report called the Quality of
    Sales Report Card was created to assist managers to monitor how
    their bankers were performing on these measures.
        In 2013, Wells Fargo conducted its first data analysis
    intended to identify bankers who were opening accounts in which
    money was initially deposited, but then removed and no further
    account activity occurred. This analysis was conducted out of
    concern that bankers might be trying to manipulate the sales-
    integrity metrics--particularly the rate of accounts funded
    within the first 30 days, by ``simulating'' funding of the
    accounts through transfers of funds. Based on the findings from
    this analysis, Wells Fargo's Corporate Investigations conducted
    an intensive investigation in the Los
    Angeles/Orange County region, resulting ultimately in the
    termination of several team members. The fact of this
    investigation, and some of the terminations, were what was
    publicized in the Los Angeles Times article on October 3, 2013.
    Wells Fargo's investigation continued into 2014 and resulted in
    further terminations.
        Based on the information learned from this initial
    proactive analysis, Wells Fargo began to implement changes to
    its policies and procedures in 2014 to attempt to mitigate the
    occurrence of sales-practices violations. Wells Fargo's efforts
    to further refine its policies and procedures and to
    investigate instances of sales-practices violations continued
    up until, and after, the Los Angeles City Attorney lawsuit was
    filed in May 2015. A third-party consulting firm,
    PricewaterhouseCoopers (PwC), was engaged in September 2015 to
    conduct a massive data-driven analysis of deposit and credit
    card accounts going back to May 2011. The results of this
    analysis for checking and savings accounts and credit cards
    were
    available in 2016.

    Q.5. Does Wells Fargo have any information indicating that
    company employees created bank accounts or credit card accounts
    without customer consent prior to 2009? If so, how did the
    company obtain this information? When was the first reported
    case, and how many cases that occurred prior to 2009 have been
    discovered? Have you reported those cases to Federal financial
    regulators?

    Q.6. At the hearing, Wells Fargo announced that it would expand
    its ``remediation review'' to bank accounts and credit card
    accounts created in 2009 and 2010.\1\ As was asked at the
    hearing, we have received reports of company employees creating
    false accounts before 2009, why have you limited your
    remediation review to 2009-2015? What steps will Wells Fargo
    take to ensure that customers with fraudulent accounts created
    before 2009 are compensated?
    ---------------------------------------------------------------------------
        \1\ Wells Fargo, ``Wells Fargo Chairman and CEO John Stumpf
    Outlines a Series of New Actions to Strengthen Culture and Rebuild
    Trust of Customers and Team Members at Senate Banking Committee Hearing
    (press release)'' (September 20, 2016) (online at https://
    www.wellsfargo.com/about/press/2016/new-actions-strengthen-
    culture_0920.content).

    A.5.-A.6. As is the case with any large organization involved
    in sales, Wells Fargo has never been immune to issues of sales-
    practice violations or related incidents of unethical behavior
    on the part of some of our team members.
        We appreciate and share your concern that any and all
    customers who may have been impacted should be identified.
    Therefore, we are continuing to examine whether there are ways
    to identify unauthorized accounts opened prior to 2009. As an
    important initial step, we are notifying all of our consumer
    and small business Community Banking customers with a checking,
    savings, credit card, or line of credit account of this issue;
    we are also inviting and encouraging them to speak with a Wells
    Fargo representative if they have any questions or concerns
    about their accounts. Please also note that the Independent
    Directors of Wells Fargo's Board of Directors have launched an
    investigation into these issues, and that investigation is
    ongoing.
        Last, we would note again that pursuant to the CFPB and the
    OCC Consent Orders, Wells Fargo will retain the services of an
    independent consultant and develop redress and reimbursement
    plans to identify the population of consumers who may have been
    affected by improper sales practices. We fully expect that,
    once approved by our regulators, the redress and reimbursement
    plans will encompass various forms of harm, including harm
    related to credit bureau inquiries, and that Wells Fargo will
    issue and track reimbursement payments.

    Q.7. As was asked at the hearing, are you confident that this
    type of fraudulent activity does not exist in other Wells
    business lines? Have you discovered other types of misconduct
    involving other products aside from credit cards or basic
    banking (such as misconduct related to applications for
    mortgages or personal or other loans, or lines of credit,
    insurance, or other investment areas)? If so, how did the
    company obtain this information? When was the first reported
    case, how many cases have been discovered, and what is the
    nature of these cases? Have you reported those cases to Federal
    financial regulators?

    A.7. We believe that the activity at issue here was limited to
    certain team members within the Community Banking Division.

    Q.8. Have you discovered misconduct relating to additional
    criminal or other misbehavior with the false accounts (such as
    bank employees using improperly created credit cards accounts
    for illegal purchases)? If so, how did the company obtain this
    information? When was the first reported case, how many cases
    have been discovered, and what is the nature of these cases?
    Have you reported those cases to Federal financial regulators?

    A.8. Although Wells Fargo can never be fully certain that it
    has identified all team member misconduct, the Company has
    increased its monitoring and compliance efforts to identify
    further misconduct. In addition, Wells Fargo has made
    significant changes to its policies and practices to prevent
    misconduct, enhance oversight, expand customer transparency,
    and improve the customer experience. We would like to highlight
    the following points:

       LWe have named a new head of our retail banking
            business.

       LWe have also changed the retail banking business's
            risk management processes. This is consistent with the
            reorganization of enterprise functions we have
            conducted across the Company to create a stronger risk
            and control foundation that allows senior team members
            across the Company to provide more independent,
            credible challenges to how we operate.

         LTo this end, we are transitioning a number of
            control functions out of the lines of business, which
            includes Community Banking, and centralizing them
            within Wells Fargo's independent corporate Risk
            function, which will be responsible for sales-practice
            oversight, as well as establishing an independent Sales
            Practices Office.

       LWe have eliminated product sales goals for all
            Regional Bank team members who serve customers in our
            retail branches.

       LWe have made system and process enhancements,
            including sending automated confirmation emails to our
            customers every time a new personal or small business
            checking account or a savings account is opened; and
            acknowledgements are also sent for credit card
            applications. We are also working to improve multi-
            factor authentication to protect our customers'
            information, and signatures are captured electronically
            approximately 99 percent of the time for new checking,
            savings, and credit card applications. In addition, we
            are closing automatically inactive new deposit accounts
            that, after 62 days, have a zero balance, without
            assessing a monthly fee.

       LThis year alone, we have committed more than $50
            million to enhanced quality assurance monitoring.

       LWe have expanded an independent third-party mystery
            shopper program, adding risk professionals to provide
            greater oversight, and expanding our customer complaint
            servicing and resolution process.

       LWe are surveying team members to understand their
            views on our Company's approach to ethics and
            integrity.

       LWe also have commenced the process with our
            regulators to engage an independent consultant to
            review sales practices in Community Banking. In
            addition, we will be engaging external consultants to
            review sales practices across the Company.

       LAnd we will be engaging outside independent culture
            experts to help us understand where we have cultural
            weaknesses that need to be strengthened or fixed.

    Q.9. At the hearing you indicated that you met with Ms.
    Tolstedt weekly, but you did not answer how often you talked
    with her. How often did you have conversations with Ms.
    Toldstedt? At any point in your regular conversations or
    meetings did she raise concerns with you about the firms'
    cross-selling focus, sales goals, firings related to
    unauthorized accounts, or other related matters? When did she
    first raise these concerns with you?

    Q.10. You testified that it was in 2013 that the discussion
    with Ms. Tolstedt on this topic made an impression upon you.
    Does this mean that she raised this with you earlier and it did
    not make an impression? Please explain.

    Q.11. Did you ask Ms. Tolstedt when she first learned about
    this wrongdoing? If so, when did you ask her? If you asked her,
    what information did Ms. Tolstedt provide you to when you
    asked? Did you ever ask her why she waited so long before
    bringing this to the attention of other members of senior
    management? What did she say?

    A.9.-A.11. It is our understanding that, from time to time,
    because of Mr. Stumpf's position, individuals would contact him
    directly and complain about issues and that Mr. Stumpf did
    receive complaints about sales-practice issues over the years.
    When Mr. Stumpf received such complaints, our understanding is
    that his practice was to forward them to the appropriate
    internal team, such as Human Resources, to address.
        Mr. Stumpf has said that he recalls learning of the
    increase in the number of reports of sales-practice issues in
    late 2013.
        Additionally, Wells Fargo cannot determine for certain the
    first time Ms. Tolstedt was told that a team member's
    employment was terminated for committing a sales violation.
    Like any large employer, Wells Fargo monitors sales-integrity
    and integrity issues so that, as issues came up that needed to
    be addressed, Ms. Tolstedt would be informed about those
    issues. The ongoing investigation by the Independent Directors
    of the board of directors and others is looking carefully at
    this question.
        Again, please note that the Independent Directors of Wells
    Fargo's Board of Directors have launched an investigation into
    sales-practice issues, and that investigation is ongoing.

    Q.12. Please provide the Committee with all communication
    between you and Ms. Tolstedt on this topic for which a record
    exists from 2007 forward. By way of illustration, this should
    include communication regarding gaming, pinning, bundling,
    simulated funding, employee terminations, internal complaints,
    lawsuits, etc.

    Q.13. As was requested in the hearing, please provide a
    timeline of Wells' first contact, and subsequent interactions,
    with the CFPB, OCC, and Los Angeles City Attorney's office.
    Please provide copies of the documents Wells Fargo produced to
    the CFPB, OCC, the Los Angeles prosecutor, and PwC in
    connection with this matter.

    A.12.-A.13. As Comptroller Curry testified before the Senate
    Banking Committee on September 20, 2016, Wells Fargo management
    meets regularly with the Office of the Comptroller of the
    Currency (OCC), our prudential regulator, about a variety of
    issues. Wells Fargo immediately cooperated with the OCC upon
    its first contact with the bank concerning these issues.
    Ultimately that involved addressing Matters Requiring Attention
    (MRAs) the OCC imposed as well as providing relevant documents
    in 2015.
        Wells Fargo's General Counsel notified the CFPB of the Los
    Angeles City Attorney's lawsuit at or about the time it was
    filed in May of 2015. The CFPB requested information shortly
    after Wells Fargo notified the Bureau of the lawsuit. In June
    and July 2015, Wells Fargo provided information to the CFPB.
        The City Attorney filed its complaint in May 2015. Wells
    Fargo did not have substantive conversations with the City
    Attorney's office prior to that time.

    Q.14. Please provide the Committee with all reports prepared
    internally or by third parties to evaluate policies and
    practices that led to these activities, the extent of these
    activities, as well as any reports to understand and address
    customer harm, including the PwC, Accenture and Skadden
    studies.

    Q.15. Please provide the Committee with all minutes and all
    materials related to these activities (including, but not
    limited to any report prepared by the investigations,
    compliance, bank secrecy/anti-money laundering, audit or human
    resources functions) provided to members of the Compensation,
    Risk, and Audit and Exam Committees, as well as the full board,
    for all meetings for the period 2007 to the present.

    Q.16. Please provide the Committee with any communication that
    the board of directors, any committee of the board or any
    individual board member had with any government enforcement
    agency, any institution personnel or other board member,
    regarding any matter relating to the activities.

    Q.17. Please identify the positions held by the personnel in
    the corporate General Counsel's office and other senior
    management
    offices that are involved with complaints by employees, former
    employees and customers that are filed in court and are subject
    to
    negotiation or arbitration and that allege or refer to the
    activities associated with the misuse of customer personal
    information or the opening of unauthorized accounts as well as
    any other practices used to further those activities, including
    but not limited to sales incentives and those practices
    described as pinning, sandbagging, bundling, gaming, or like
    actions.

    Q.18. Please describe the role and level of involvement that
    such personnel (and the General Counsel's office and other
    senior management offices to which they belong) have in
    monitoring, hiring outside counsel, directing, negotiating or
    the decisionmaking in those matters, and how such matters are
    reported up to the General Counsel, senior management, and
    board members.

    A.14.-A.18. The issues described above would be handled by a
    range of Wells Fargo team members depending on the nature of
    the allegations raised. Wells Fargo's Office of General Counsel
    monitors all legal claims against the bank and makes
    appropriate staffing decisions, including the use of outside
    counsel, when
    required.

    Q.19. When asked whether you have referred any of your
    personnel to law enforcement between when you learned about
    this issue until the present, you said that you did when it was
    required. Can you please specify the number of employees that
    you have referred, their names and titles, the agencies to
    which they have been referred, and the violations for which
    they were referred?

    Q.20. Please provide the number of Suspicious Activity Reports
    (SARs) related to these activities that were filed for each
    year from 2007 to the present.

    A.19.-A.20. Wells Fargo has policies, procedures, and internal
    controls that are reasonably designed to comply with its legal
    obligations to monitor, detect, and report suspicious
    activities. Under Federal law, Suspicious Activity Reports
    (``SARs''), and any information that would reveal the existence
    of a SAR, are confidential, 31 U.S.C.  5318(g)(2)(A)(i) and 12
    C.F.R.  21.11(k).

    Q.21. As was requested at that hearing, when did you begin to
    disclose in SEC filings that you had this potentially material
    adverse set of circumstances that could damage your
    reputational value?

    A.21. Each quarter, we look at the relevant and appropriate
    facts available to us to determine whether a legal matter is
    material and should be disclosed in our public filings.
    Discerning materiality is not a mechanical exercise but rather
    is a determination based on judgments informed by the facts and
    circumstances known at the time the determination is made.
        Based on the facts and circumstances as we knew them at the
    time, we concluded that the sales-practices investigations by
    the Consumer Financial Protection Bureau (CFPB), the Office of
    the Comptroller of the Currency (OCC), and the Los Angeles City
    Attorney were not material. This was a considered determination
    based upon what we understood at the time these investigations
    were occurring.
        As part of our ongoing review process, we continued to
    evaluate the ongoing developments since the announcement of the
    settlements to determine whether any filings or disclosures
    should be made. In conjunction with our Form 8-K filing on
    September 28, 2016, announcing our former CEO John Stumpf's and
    our former Community Banking head Carrie Tolstedt's forfeiture
    of their unvested equity awards, we determined that it was
    appropriate to disclose the relevant legal developments that
    had occurred since the announcement of the settlements. As
    noted in our Form 8-K, these included ``formal or informal
    inquiries, investigations or examinations'' from ``[F]ederal,
    State, and local government agencies, including the United
    States Department of Justice, and State attorneys general and
    prosecutors' offices, as well as Congressional
    committees . . . ''\2\ Furthermore, our Form 10-Q filing on
    November 3, 2016, contained additional disclosures concerning
    sales practices matters, including an update to our legal
    actions disclosures and the addition of a new risk factor
    summarizing the legal developments and related events that had
    occurred since the announcement of the settlements and noting
    the potential that ``negative publicity or public opinion
    resulting from these matters may increase the risk of
    reputational harm to our business . . . ''\3\ We will continue
    to review developments related to sales practices matters and
    make additional disclosures as the facts and circumstances
    warrant.
    ---------------------------------------------------------------------------
        \2\ See Wells Fargo, September 28, 2016, Form 8-K (available online
    at https://www.sec.gov/Archives/edgar/data/72971/000119312516722259/
    d266244d8k.htm).
        \3\ See Wells Fargo, November 3, 2016, Form 10-Q at 67 (available
    online at https://www.sec.gov/Archives/edgar/data/72971/
    000007297116001340/wfc-9302016x10q.htm).
    ---------------------------------------------------------------------------
    Employees
    Q.22. Please provide the Committee with information on the
    following items for each year from 2007 to the present for the
    Community Banking Group and all of Wells Fargo, broken out by
    position (e.g., tellers, bankers, branch managers, district
    managers,
    regional managers, and senior management):

      a. Lthe number of employees terminated for engaging in,
            encouraging or tolerating such activities;

      b. Lthe number of employees who were terminated because they
            did not meet sales quotas;

      c. Lthe number of employees who resigned or retired or were
            asked or instructed to resign or retire for engaging
            in, encouraging or tolerating such activities;

      d. Lthe number of employees who were subject to internal
            disciplinary measures for engaging in, encouraging or
            tolerating such activities; and

    A.22.a.-d. From 2011 to 2015, approximately 5,300 team members
    were terminated for certain sales-integrity violations. The
    majority of the terminated team members held banker,
    management, or other functionally similar positions.
    Approximately 1,000 were terminated each year. For example,
    investigations by the Corporate Investigations group in 2013
    resulted in the termination of 1,245 Community Banking team
    members. That is approximately 1 percent of Wells Fargo's total
    population of Community Banking
    employees.
        Approximately 65 percent of the terminated team members
    were in Personal Banker positions or functionally similar roles
    and 7 percent were in Teller positions. In addition, we
    terminated the employment of over 480 team members in
    supervisory positions, including store managers and persons up
    to three levels above bankers and tellers, when investigations
    have found that those team members engaged in or directed
    improper sales practices or exhibited excessive pressure and
    did not respond promptly and decisively to change their
    behavior. All of these team members were terminated for sales-
    integrity violations, not for failing to meet product sales
    quotas.
        Wells Fargo cannot quantify with any degree of confidence
    how many team members were disciplined solely for not meeting
    sales goals. Wells Fargo has safeguards in place to help ensure
    that managers remain focused on assessing team members' overall
    performance in helping customers succeed financially, not just
    whether they meet an individual sales goal. This includes a
    strong performance management program, which provides for
    coaching and feedback to help team members succeed and
    involvement of Human Resources in disciplinary decisions.
        Wells Fargo team members who believe they were disciplined
    for not meeting sales goals can raise those concerns through a
    number of different channels, including through their
    management chain, Human Resources, or the EthicsLine. Moreover,
    Wells Fargo has established a process to enable former team
    members who contact the Company today to request a review of
    their termination, even if they did not utilize the Company's
    termination appeal and review processes at the time of their
    departure. Former team members who did utilize the Company's
    appeal processes in the past will be provided with an
    additional review. Former team members who express interest in
    reemployment and are deemed to be eligible for reemployment
    through this review process will be able to work with a special
    recruiting team to assist in exploring opportunities at Wells
    Fargo.

    Q.22.e. Please provide the Committee with information on the
    median pay by position for each year from 2007 to the present
    for the Community Banking Group and all of Wells Fargo, broken
    out by position (e.g., tellers, bankers, branch managers,
    district managers,
    regional managers, and senior management).

    A.22.e. Below is a table that provides the median Full Time
    Equivalent (FTE) base pay for positions within the Regional
    Bank from 2007 through September 1, 2016. In addition, all
    salaried and hourly team members classified as regular or part-
    time (i.e., those who are regularly scheduled to work 17.5
    hours or more per week) are eligible for Wells Fargo-sponsored
    benefits, including tuition reimbursement, healthcare
    insurance, dental insurance, vision insurance, life insurance,
    short- and long-term disability, 401(k) plan, and paid parental
    leave.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Q.23. Please provide the Committee with any documentation
    related to sales quality metrics used by compliance, marketing,
    or any other unit within the Community Banking Division to
    evaluate employees' performance. Please provide documentation
    of how these metrics changed between 2007 and the present.

    Q.24. Please also provide copies of written policies or
    procedures that outline how Wells Fargo disciplined employees
    that did not meet their sales quotas from 2007-2015. Finally,
    please provide your plans for making these employees whole.

    A.23.-A.24. From 2011 to 2015, approximately 5,300 team members
    were terminated for certain sales-integrity violations. The
    majority of the terminated team members held banker,
    management, or other functionally similar positions.
    Approximately 1,000 were terminated each year. For example,
    investigations by the Corporate Investigations group in 2013
    resulted in the termination of 1,245 Community Banking team
    members. That is approximately 1 percent of Wells Fargo's total
    population of Community Banking employees.
        Approximately 65 percent of the terminated team members
    were in Personal Banker positions or functionally similar roles
    and 7 percent were in Teller positions. In addition, we
    terminated the employment of over 480 team members in
    supervisory positions, including store managers and persons up
    to three levels above bankers and tellers, when investigations
    have found that those team members engaged in or directed
    improper sales practices or exhibited excessive pressure and
    did not respond promptly and
    decisively to change their behavior. All of these team members
    were terminated for sales-integrity violations, not for failing
    to meet product sales quotas.
        Wells Fargo cannot quantify with any degree of confidence
    how many team members were disciplined solely for not meeting
    sales goals. Wells Fargo has safeguards in place to help ensure
    that managers remain focused on assessing team members' overall
    performance in helping customers succeed financially, not just
    whether they meet an individual sales goal. This includes a
    strong performance management program, which provides for
    coaching and feedback to help team members succeed and
    involvement of Human Resources in disciplinary decisions.
        Wells Fargo team members who believe they were disciplined
    for not meeting sales goals can raise those concerns through a
    number of different channels, including through their
    management chain, Human Resources, or the EthicsLine. Moreover,
    Wells Fargo has established a process to enable former team
    members who contact the Company today to request a review of
    their termination, even if they did not utilize the Company's
    termination appeal and review processes at the time of their
    departure. Former team members who did utilize the Company's
    appeal processes in the past will be provided with an
    additional review. Former team members who express interest in
    reemployment and are deemed to be eligible for reemployment
    through this review process will be able to work with a special
    recruiting team to assist in exploring opportunities at Wells
    Fargo.

    Q.25. Please provide the States and Zip Codes of the Wells
    Fargo branches where each of the 5,300 employees were
    terminated.

    A.25. Wells Fargo team members' employments were terminated in
    the following States (and District of Columbia):

    Alabama
    Alaska
    Arizona
    Arkansas
    California
    Colorado
    Connecticut
    Delaware
    Florida
    Georgia
    Idaho
    Illinois
    Indiana
    Iowa
    Kansas
    Kentucky
    Maryland
    Massachusetts
    Michigan
    Minnesota
    Mississippi
    Missouri
    Montana
    Nebraska
    Nevada
    New Jersey
    New Mexico
    New York
    North Carolina
    North Dakota
    Ohio
    Oregon
    Pennsylvania
    South Carolina
    South Dakota
    Tennessee
    Texas
    Utah
    Virginia
    Washington
    Washington, DC
    Wisconsin
    Wyoming

        Please see Appendix I for the list of Zip Codes of the
    affected branches.

    Q.26. What was Wells Fargo's policy on the employees who
    reported concerns to their managers, human resources division
    or used the hotline and were fired? Please share with the
    Banking Committee any internal memos, or pertinent exchanges,
    outlining the strategy for firing employees who raised
    concerns.

    Q.27. At the hearing, you indicated that employee ethics
    complaints were handled by an outside firm and to resolve an
    issue an employee would not be confronted by his or her
    supervisor. Please provide a detailed description of the ethics
    complaint process in 2007, and any subsequent changes to it.

    A.26.-A.27. It has never been a policy or practice of Wells
    Fargo to terminate team members who voiced their concerns to
    managers, the human resources division, or through the ethics
    hotline. We are aware that certain former team members are
    making these allegations and we take them very seriously. We
    are currently investigating the issue.
        Wells Fargo has long had internal processes in place for
    team members to raise issues or concerns through multiple
    channels, including managers, HR, Compliance and/or the
    EthicsLine. We encourage team members to speak up if they
    experience or witness something that makes them feel
    uncomfortable and have measures in place to protect team
    members from retaliation. The EthicsLine provides team members
    with a confidential way to report possible violations of Wells
    Fargo's Code of Ethics and Business Conduct or any laws, rules
    or regulations. Team members have the option to remain
    anonymous through the EthicsLine. It is available to all team
    members (U.S. and international) 24-hours a day, 7-days a week,
    via toll-free telephone or online Web reporting. The EthicsLine
    has been operated and staffed by a third-party vendor since its
    inception in 2004, and translation services are available. This
    process helps ensure team member confidentiality and preserves
    anonymity when requested.
        All team members who call the EthicsLine are provided with
    an EthicsLine ID that is associated with their EthicsLine
    Report. Team members who elect to remain anonymous are asked to
    either call back to the EthicsLine or log into the EthicsLine
    Web Portal in 10 calendar days to provide additional
    information or answer any questions relating to their report.
    To further protect the integrity of the confidential hotline,
    the vendor does not record any data related to the incoming
    telephone calls or Web reports. Team members who self-identify
    are advised that since they provided their name and contact
    information, Wells Fargo now has the option to contact them
    directly if needed. They are also told they can call the
    EthicsLine at any time to provide additional information.
        Interview specialists with the EthicsLine vendor listen,
    ask clarifying questions if necessary, and then write a summary
    report of the call. The summary is then provided to Wells
    Fargo's Office of Global Ethics and Integrity for assessment
    and referral to the appropriate review team.
        Wells Fargo takes measures to protect team members from
    retaliation, including maintaining confidentially during the
    review process. Specifically:

       LAll reports of suspected unethical or illegal
            activities are taken seriously and measures are in
            place to ensure concerns are promptly evaluated and
            reviewed.

       LThe review of concerns in many cases will require a
            fact-finding that may involve interviews with
            individuals the Company determines may have information
            relevant to the underlying issue or concern. However,
            management of any review and updates regarding facts,
            progress and outcomes are limited to only those who
            have a legitimate business need to know.

       LIt may be possible in some cases for the
            researcher/investigator to determine the identity of
            the team member due to the nature of the issue reported
            and the information shared by the team member. However,
            the researcher/investigator would not ask the team
            member to self-identify as the person who made the
            EthicsLine Report.

        In no circumstances is the team member told the specifics
    about any corrective action taken against another team member
    as it is not Wells Fargo's practice to discuss confidential
    information regarding one team member with another. Wells Fargo
    will only share information regarding the review, including any
    corrective action taken, with those who have a legitimate
    business need to know.
        Wells Fargo's Nonretaliation Policy, which is available to
    all team members in the Team Member Handbook and reiterated in
    the Code of Ethics and Business Conduct, mandates that no team
    member may be retaliated against for providing information in
    good faith about suspected unethical or illegal activities,
    including fraud, securities law, or regulatory violations, or
    possible violations of any Wells Fargo policies. Retaliatory
    behavior has always been, and continues to be, grounds for
    corrective action, up to and including termination of
    employment. Team members who believe that they or someone else
    has been retaliated against for reporting an issue are
    instructed to report it as soon as possible to their supervisor
    or manager, H.R. Advisor team, or Corporate Employee Relations,
    to ensure that a prompt review is conducted and, where
    appropriate, corrective action is taken. Team members can also
    report retaliation concerns via the EthicsLine.
        Wells Fargo has additional safeguards to prevent any form
    of
    retaliation, including the fact that Wells Fargo's Human
    Resources personnel are typically consulted in every
    termination decision. Additionally, team members whose
    employments have been terminated may utilize Wells Fargo's
    termination review process to request to have that decision
    reviewed by a Corporate Employee
    Relations professional who was not previously consulted in the
    termination decision.
        To further strengthen our program and foster an environment
    where all team members feel comfortable escalating matters
    without fear of retaliation, we are making improvements to the
    program, including:

       LEnhancing our Company-wide standards to ensure a
            consistent team member experience and safeguards,
            regardless of the type of issue reported or which group
            is conducting the
            research or investigation.

       LReinforcing our standards and processes that
            protect team members from retaliation. This will
            include requiring that the appropriate review unit
            evaluating the underlying issues or concerns must
            provide a reminder of the Company's Nonretaliation
            Policy to all individuals interviewed or contacted as
            part of the review, as well as all managers who may be
            part of any corrective action decisions arising out of
            the review.

       LEnsuring that reports of suspected unethical or
            illegal activities are evaluated, investigated, and
            appropriately escalated in a timely and confidential
            manner by continually monitoring and refining our
            EthicsLine research and investigative processes. This
            will include the adoption of Speak Up, Investigative,
            and Nonretaliation Standards to help guide the research
            and investigative process.

       LCreating additional training, communications, and
            resources to help team members understand their
            responsibilities under the Code of Ethics and Business
            Conduct and related policies, the importance of
            speaking up, and what to do when faced with an ethical
            dilemma.

        With respect to allegations from former team members who
    claim that their employment was terminated or they were demoted
    after refusing to open unauthorized accounts and/or after
    reporting concerns to the EthicsLine, we are reviewing each of
    the situations. As described above, team members have the
    option to raise concerns anonymously, so Wells Fargo likely
    will not have records identifying former team members who
    raised concerns anonymously through the EthicsLine.
    Nevertheless, Wells Fargo is taking steps to review such
    termination/demotion decisions where possible and has engaged
    outside consultants to help us with this review. Moreover,
    Wells Fargo has established a process to enable former team
    members who contact the Company today to request a review of
    their termination, even if they did not utilize the Company's
    termination appeal and review processes at the time of their
    departure. Former team members who did utilize the Company's
    appeal processes in the past will be provided with an
    additional review. Former team members who express interest in
    reemployment and are deemed to be eligible for reemployment
    through this review process will be able to work with a special
    recruiting team to assist in exploring opportunities at Wells
    Fargo.

    Q.28. During your testimony, you consistently cited your
    participation in ``Town Hall'' style meetings to explain how
    you communicated to employees that they should not, under any
    circumstances, create false accounts for customers in order to
    meet sales quotas. Please provide transcripts from all Town
    Hall-style meetings that you participated in from 2011 to 2015.
    Please demarcate all areas of those transcripts in which you
    clearly state that employees should not be defrauding
    customers.

    A.28. Mr. Stumpf addressed the unauthorized accounts issues
    during a townhall meeting following the December 2013 Los
    Angeles Times story. During that townhall, Mr. Stumpf informed
    team members he ``want[ed] to address'' the issues discussed in
    the article ``head on.'' Of note, he said:

            Our culture is about service. We want to help our customers
            succeed financially, and we're not in the product pushing
            business. Think of . . . yourselves . . . no matter what
            business you're in, whether you help those who service our
            external customers or if you serve them directly, I think of
            all of us as being financial physicians. We meet our customers
            . . . and we have a conversation with them. And we listen
            carefully for their needs. And once we discover a need, we then
            through our skill set, understanding, and experience, our
            value-add, we offer a product or a service or a series of
            products and services to help them. We don't try to sell them
            something that they don't need or don't want . . .

            Here's my ask of you and for everybody listening today. If you
            believe that your team, your boss, your boss' boss somehow is
            putting pressure on you to sell things that your customers
            don't want, don't need, raise your hand . . . And if you're not
            comfortable doing that, there's an anonymous . . . EthicsLine,
            [or you can] talk to somebody in HR. We want to do the right
            thing. We're in the long-term business.\4\
    ---------------------------------------------------------------------------
        \4\ Hollywood, FL, Town Hall, February 5, 2014 (Transcript on
    file).

    Q.29. Were fraudulent accounts created in one branch location
    from the account information of customers of another branch?
    Did employees establish accounts or claim to sell additional
    ---------------------------------------------------------------------------
    products to customers in another State?

    A.29. Wells Fargo customers frequently utilize multiple
    branches and will themselves open accounts at different
    locations at different times. Some potentially unauthorized
    accounts were opened at different locations than other accounts
    owned by the same customer, but we are not aware whether that
    is due to customer choice or banker conduct. We are not aware
    of unauthorized accounts being opened in States other than
    those where the customer banked, however, our internal review
    is ongoing.

    Q.30. Did employees establish accounts or claim to sell
    additional products for minor children?

    A.30. Wells Fargo does not currently know the extent to which
    unauthorized accounts were opened in the name of minor
    children, however, our internal review is ongoing.
        We would note that the Consumer Financial Protection Bureau
    (CFPB) and Office of the Comptroller of the Currency (OCC)
    Consent Orders both require Wells Fargo to retain the services
    of an independent consultant and to develop redress and
    reimbursement plans that will identify the population of
    consumers who may have been affected by improper sales
    practices.

    Q.31. During your testimony, you denied that the Wells Fargo
    incentive structure was responsible for the widespread
    fraudulent activity at your bank. Further, you and your
    colleagues at the bank have stated that the 5,300 fired
    employees acted without guidance from management and were rogue
    employees. In comparison, little has been reported on the
    bonuses or incentive structures for regional and branch
    managers. What bonuses did Wells Fargo pay to regional and
    branch managers for successful (either meeting or exceeding
    their sales quotas) cross-selling numbers?

    A.31. Prior to our elimination of product sales goals, Regional
    Bank store managers in our retail branches earned incentive
    compensation based in part on the store's performance relative
    to store goals. If a particular store met its sales goal, the
    store manager would have been eligible for bonus compensation.
    The store manager would have been eligible for additional bonus
    compensation for exceeding the goal at various levels. For the
    purposes of context, between 2011 and 2014, the median
    incentive payout as a percentage of total salary earned by
    store managers based on sales-related performance objectives
    (versus incentive opportunities provided for service and other
    performance objectives) declined from 8.5 percent in 2011 to
    4.0 percent in 2014. The median payout earned by district
    managers, who supervise store managers, also declined between
    2011 and 2014, from 13.1 percent to 3.0 percent.
    Consumer Harm
    Q.32. Please provide a State-by-State list of the number of
    Wells Fargo customers that you have determined may have been
    harmed by this misconduct.

    A.32. We asked PwC to analyze approximately 82 million deposit
    accounts for instances of potential simulated funding and
    approximately 11 million credit card accounts for instances of
    lack of authorization. The accounts reviewed were opened
    between 2011 and 2015. Of the accounts reviewed, PwC found that
    approximately 623,000 consumer and business credit card
    accounts could have been  [emphasis added] unauthorized, and
    approximately 1.5 million deposit accounts could have [emphasis
    added] experienced simulated funding, that is, the unauthorized
    deposit and withdrawal of funds intended to create the false
    appearance that the account was being used by the customer. PwC
    did not [emphasis added] conclude that these accounts were
    unauthorized and/or experienced simulated funding; it just
    could not rule out these possibilities.
        Below is the State-by-State list of the number of deposit
    and credit card accounts that PwC identified, within the total
    of
    approximately 2.1 million accounts identified. Although PwC
    identified accounts in all 50 states, for the reasons discussed
    it is not clear that unauthorized credit card accounts were
    actually opened and/or deposit accounts experienced simulated
    funding in all 50 States:
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Q.33. As requested at the hearing, please provide the
    proportion of customers who were harmed by Wells' misconduct
    who are: elderly, racial/ethnic minorities, and military/
    veterans.

    Q.34. Please provide the number of customers identified by the
    PwC study as having had a fraudulent account opened by age
    cohort: 0-17; 18-30, 31-40, 41-50, 51-60, 61-70, 71-80, 81-90,
    91+.

    A.33.-A.34. Wells Fargo collects date-of-birth data and our
    initial review indicates that elderly customers were not
    overrepresented among the population of customers who may have
    had an unauthorized deposit account opened in their name.
        Of the 2.1 million accounts that PwC identified, 5,089
    accounts were associated with customers who are identified in
    the Defense Manpower Data Center (DMDC) as being active duty,
    reserve, or National Guard. In other words, less than 0.3
    percent of the accounts identified by PwC were associated with
    customers who are identified in the DMDC.
        We do not collect data concerning race or ethnicity during
    the application process.

    Q.35. Please provide the Committee with a list of the written
    policies for 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014,
    and 2015 that Wells Fargo provided to consumers upon their
    opening of a bank account or credit card account that explain
    the fees associated with those accounts.

    Q.36. Will Wells Fargo be providing any nonmonetary
    compensation (such as free credit reporting, ID protection, or
    discounted or free Wells Fargo services) to customers? Please
    explain.

    Q.37. Does Wells Fargo have a policy for assisting customers
    who had their identification stolen and faced significant costs
    due to actions taken by Wells Fargo employees? Please explain.

    A.35.-A.37. Wells Fargo is working very hard to remediate harm
    that may have been caused to our customers. To that end,
    pursuant to the CFPB and OCC Consent Orders, Wells Fargo will
    retain the services of an independent consultant and develop
    redress and reimbursement plans to identify the population of
    consumers who may have been affected by improper sales
    practices. We fully expect that, once approved by our
    regulators, the redress and reimbursement plans will encompass
    various forms of harm, including harm related to credit bureau
    inquiries, and that Wells Fargo will issue and track
    reimbursement payments.
        Wells Fargo is contacting credit card customers for the
    purpose of determining whether they want their credit cards and
    to help us identify customers who may have an unauthorized
    credit card account. We are not using these calls to promote
    other products or services. Our script simply informs customers
    that we are calling them about an inactive account and asks
    whether they want the account.
        For those customers who want the credit card, the account
    will remain open. For any customer who does not want their
    credit card, Wells Fargo is closing the account and correcting
    credit bureau reporting. This means we are removing the account
    from the customers' credit reports going forward and
    suppressing the existence of the inquiry so that it is not
    viewable to other lenders or requestors (the Fair Credit
    Reporting Act prohibits us removing the inquiry altogether and
    it will still be visible to customers pulling their own credit
    reports).
        Moreover, we are in the process of determining how many
    customers obtained a credit product, with Wells Fargo or
    another company, during the time period in which their credit
    score may have been impacted by an unauthorized credit inquiry
    or existence of the trade line. While it may be difficult to
    calculate the precise impact for every customer, our intent is
    to err on the side of the customer and compensate them for
    impacts to their other credit accounts. This could include
    impacts on pricing, line or loan size, or credit decision. We
    have allocated significant resources to this effort and are
    working with the credit bureaus to develop a plan for
    submission to our regulators.
        Going forward, Wells Fargo is voluntarily expanding its
    review of accounts to include 2009 and 2010. Wells Fargo also
    provides resources to help customers request free credit
    reports and is offering a no-cost mediation option to impacted
    customers to help identify and remediate any other forms of
    harm.
        Ultimately, if any customer has any questions or concerns
    regarding his or her accounts--regardless of when those
    accounts were opened--he or she is invited to contact us so
    that Wells Fargo can address those questions or concerns.

    Q.38. You indicated at the hearing that you would consult with
    your team as to any data limitations that would prevent you
    from identifying customers harmed earlier than 2009. What are
    the results of those conversations? How far back can Wells
    Fargo conduct an examination similar to the one conducted by
    PwC?

    A.38. We appreciate and share your concern that any and all
    customers who may have been impacted should be identified.
    Therefore, we are continuing to examine ways to discern if any
    unauthorized accounts were opened prior to 2009. As an
    important initial step, we are notifying all of our consumer
    and small business Community Banking customers with a checking,
    savings, credit card, or line of credit account of this issue;
    we are also inviting and
    encouraging them to speak with a Wells Fargo representative if
    they have any questions or concerns about their accounts.
    Please also note that the Independent Directors of Wells
    Fargo's Board of Directors have launched an investigation into
    these issues, and that investigation is ongoing.
        Further, we would note again that pursuant to the CFPB and
    the OCC Consent Orders, Wells Fargo will retain the services of
    an independent consultant and develop redress and reimbursement
    plans to identify the population of consumers who may have been
    affected by improper sales practices. We fully expect that,
    once approved by our regulators, the redress and reimbursement
    plans will encompass various forms of harm, including harm
    related to credit bureau inquiries, and that Wells Fargo will
    issue and track reimbursement payments.

    Q.39. As requested during the hearing, please provide specific
    information related to overdraft protection products, including
    sales goals related to overdraft, the number of consumers who
    overdrew their accounts, the number of overdraft protection
    products sold without customer knowledge, and dollar amount of
    overdraft fees charged to consumers related to this episode.

    A.39. Wells Fargo is committed to providing only those services
    that our customers need or want. Overdraft protection is one of
    those services. Customers are encouraged to contact us if they
    have any issues or concerns.

    Q.40. During the hearing you were asked how Wells Fargo's cross
    selling and sales targets compare to its competitors. Please
    provide your understanding of this answer.

    A.40. Wells Fargo is not aware of the degree to which our
    competitors use cross-sell strategies.
    Restoring the Credit Scores of Wells Fargo Customers
    Q.41. Has Wells Fargo contacted and instructed Transunion,
    Equifax, and Experian, and any other credit bureaus, to
    determine and remediate any possible harm resulting from the
    opening of, and activity on, unauthorized credit cards? Please
    provide the date(s) of any outreach by Wells Fargo to these
    bureaus, the instructions and information provided to the
    bureaus, and the proposed remediation for those customers who
    may have suffered harm.

    Q.42. Your credit restoration plan provides Wells Fargo with
    the opportunity to push new products onto customers, urge them
    to hold on to credit cards they may or may not have wanted, and
    gather additional information from customers unrelated to
    closing fraudulent accounts--opportunities that benefit Wells
    Fargo, not affected customers. Please provide a copy of the
    scripts that your company will use to contact affected
    customers, highlighting any instance in which Wells Fargo
    attempts to convince customers to purchase new products or
    retain (potentially unwanted) accounts.

    Q.43. Senator Tester asked you how you planned to identify and
    provide restitution to customers whose credit ratings were
    negatively impacted because of Wells Fargo employees' actions
    against its customers, including but not limited to
    transactions with other financial institutions. You stated that
    you would call each of Wells' credit card customers to identify
    any who have been harmed and ``have [y]our team come back and
    report to you how we're working on it.'' Please provide a
    detailed explanation of how Wells Fargo plans to identify and
    provide remediation to these customers, and to other customers
    who may not have had credit cards, but whose credit may have
    been harmed due to other products.

    Q.44. How will you confirm that inaccurate information on your
    customers' credit files has been removed? It's one thing to say
    they're removing the inaccurate information, it's another to
    ensure the bureaus go ahead and actually remove it.

    A.41.-A.44. Wells Fargo is working very hard to remediate harm
    that may have been caused to our customers. To that end,
    pursuant to the CFPB and OCC Consent Orders, Wells Fargo will
    retain the services of an independent consultant and develop
    redress and reimbursement plans to identify the population of
    consumers who may have been affected by improper sales
    practices. We fully expect that, once approved by our
    regulators, the redress and reimbursement plans will encompass
    various forms of harm, including harm related to credit bureau
    inquiries, and that Wells Fargo will issue and track
    reimbursement payments.
        Wells Fargo is contacting credit card customers for the
    purpose of determining whether they want their credit cards and
    to help us identify customers who may have unauthorized credit
    card accounts. We are not using these calls to promote other
    products or services. Our script simply informs customers that
    we are calling them about an inactive account and asks whether
    they want the account.
        For those customers who want the credit card, the account
    will remain open. For any customer who does not want their
    credit card, Wells Fargo is closing the account and correcting
    credit bureau reporting. This means we are removing the account
    from the customers' credit reports going forward and
    suppressing the existence of the inquiry so that it is not
    viewable to other lenders or requestors (the Fair Credit
    Reporting Act prohibits us removing the inquiry altogether and
    it will still be visible to customers pulling their own credit
    reports).
        Moreover, we are in the process of determining how many
    customers obtained a credit product, with Wells Fargo or
    another company, during the time period in which their credit
    score may have been impacted by an unauthorized credit inquiry
    or existence of the trade line. While it may be difficult to
    calculate the precise impact for every customer, our intent is
    to err on the side of the customer and compensate them for
    impacts to their other credit accounts. This could include
    impacts on pricing, line or loan size, or credit decision. We
    have allocated significant resources to this effort and are
    working with the credit bureaus to develop a plan for
    submission to our regulators.
        Going forward, Wells Fargo is voluntarily expanding its
    review of accounts to include 2009 and 2010. Wells Fargo also
    provides resources to help customers request free credit
    reports and is offering a no-cost mediation option to impacted
    customers to help identify and remediate any other forms of
    harm.
        Ultimately, if any customer has any questions or concerns
    regarding his or her accounts--regardless of when those
    accounts were opened--he or she is invited to contact us so
    that Wells Fargo can address those questions or concerns.
    Senior Executive Compensation
    Q.45. Please provide any board or Compensation Committee
    minutes describing (1) discussion of the pending Wells Fargo
    settlement and any impact it had on Ms. Tolstedt's decision to
    retire; (2) discussion of termination or any other penalty for
    Ms. Tolstedt in relation to her role in the Wells Fargo actions
    that resulted in the CFPB settlement; and (3) the impact of Ms.
    Tolstedt's decision to retire on her final compensation.

    Q.46. Fortune magazine reported that the decision to allow Ms.
    Tolstedt to retire rather than terminating her resulted in her
    retaining an extra $45 million in compensation. Is this report
    accurate? If not, which portions are incorrect? How much did
    Ms. Tolstedt earn or retain as compensation because of her
    retirement that she would not have been allowed to earn or
    retain if she had been terminated?

    Q.47. What are the criteria that the board will use to
    determine all elements of Ms. Tolstedt's 2016 compensation?

    A.45.-A.47. Ms. Tolstedt has left Wells Fargo. She has agreed
    to not exercise any outstanding stock options previously
    awarded by Wells Fargo until the completion of the board of
    directors' investigation and that, at the conclusion of this
    investigation, the board (or the Independent Directors of the
    board or the Human Resources Committee, through board
    delegation) will have the authority to determine the extent to
    which such options will be forfeited.\5\
    ---------------------------------------------------------------------------
        \5\ Wells Fargo, ``Independent Directors of Wells Fargo Conducting
    Investigation of Retail Banking Sales Practices and Related Matters
    (press release)'' (Sept. 27, 2016) (available online at https://
    www.wellsfargo.com/about/press/2016/independent-directors-
    investigation_0927/).
    ---------------------------------------------------------------------------
        The board's Independent Directors have determined that all
    of Ms. Tolstedt's unvested equity compensation, valued at
    approximately $19 million, would be forfeited, and that she
    would not receive a bonus for 2016 or any retirement
    enhancements or severance package in connection with her
    separation from Wells Fargo. No incentive compensation was
    granted to Ms. Tolstedt as a result of her separation from the
    Company, and none of her equity awards will be ``triggered'' or
    otherwise increased or accelerated by her separation. Ms.
    Tolstedt could be subject to further compensation and other
    actions based upon the results of the Independent Directors'
    investigation.\6\
    ---------------------------------------------------------------------------
        \6\ Wells Fargo, September 27, 2016 Form 8-K, (available online at
    https://www.sec.gov/Archives/edgar/data/72971/000119312516722259/
    d266244d8k.htm).
    ---------------------------------------------------------------------------
        Wells Fargo has multiple recoupment or clawback policies
    and provisions in place that are applicable to Wells Fargo's
    current and former executive officers, including Ms. Tolstedt.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    ---------------------------------------------------------------------------
        \7\ Adopted June 15, 2009 and extended February 2010.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The board (or the Independent Directors or the Human
    Resources Committee, through board delegation) will assess the
    relevant facts and circumstances, the award terms, and Wells
    Fargo's recoupment and clawback policies to determine whether
    to cancel or clawback any more of Ms. Tolstedt's incentive
    ---------------------------------------------------------------------------
    compensation.

    Q.48. You stated at the hearing that you are ``not an expert in
    compensation'' and that you do not sit on the Wells Fargo
    Board's Compensation Committee. To help us better understand
    your role, as Chairman of the Board, in contributing to
    compensation decisions, please provide a description of the
    process by which your board makes decisions related to
    compensation and supply any written policies or guidance on the
    role of board members and Chairman on these matters.
    Specifically, please comment on Wells Fargo's most recent proxy
    statement which states on page 51 that part of Ms. Tolstedt's
    incentive compensation award was determined based on your
    assessment of her 2015 performance.

    A.48. In deciding executive compensation, the Human Resources
    Committee of the Board of Directors (HRC) is guided by four
    compensation principles that have historically governed its pay
    decisions for named executives:

      1. LPay for Performance: Link compensation to Company,
            business line, and individual performance so that
            superior performance results in higher compensation and
            inferior performance results in lower compensation;

      2. LFoster Risk Management Culture: Structure compensation to
            promote a culture of prudent risk management consistent
            with the Company's Vision and Values;

      3. LAttract and Retain Top Executive Talent: Offer
            competitive pay to attract, motivate, and retain
            industry executives with the skills and experience to
            drive superior long-term Company performance; and

      4. LEncourage Creation of Long-Term Stockholder Value: Use
            performance-based long-term stock awards with
            meaningful and lasting share retention requirements to
            encourage sustained stockholder value creation.

        In 2015, the HRC maintained the overarching compensation
    structure for named executives that it had used in the past,
    including the relative balance between annual fixed
    compensation and annual variable ``at-risk'' compensation. The
    HRC also continued to weight long-term over annual
    compensation, and equity over cash compensation. Within this
    framework, the HRC awarded the following primary elements of
    compensation to the Company's named executive officers for
    2015: base salary, annual incentive, and long-term equity-based
    incentive.
        In 2015, Ms. Tolstedt's 2015 annual incentive award was
    determined by the HRC based on a broad set of factors,
    including the Company's financial performance, the Company's
    progress on key strategic priorities, compensation of similarly
    situated executives in the Labor Market Peer Group (where such
    information was available), success in achieving strategic
    objectives in the Community Banking division, Ms. Tolstedt's
    ability to operate as a member of a team, Ms. Tolstedt's
    success against her objectives for 2015, which included the
    financial performance of her respective business line and a
    risk and other qualitative assessment of how those results were
    achieved, as well as the recommendations of Mr. Stumpf based on
    his assessment of her 2015 performance.\8\
    ---------------------------------------------------------------------------
        \8\ Wells Fargo, 2016 Proxy Statement, at 38-39, 52 (available
    online at https://www.sec.gov/Archives/edgar/data/72971/
    000119312516506771/d897049ddef14a.htm).
    ---------------------------------------------------------------------------
        The HRC awarded Ms. Tolstedt long-term incentive
    compensation in the form of performance shares granted in
    February 2015 and RSRs granted in July 2015. In granting the
    2015 Performance Shares and establishing their terms, the HRC
    considered the appropriateness of this award structure in the
    context of multiple factors including applicable regulatory
    guidance, the quality of the Company's performance from a risk
    management perspective, and the need for continued leadership
    over the 3-year performance period. The HRC determined the
    dollar value of the Performance Share grants, taking into
    account individual experience and responsibilities, to provide
    an opportunity to realize variable compensation commensurate
    with performance and with the intention that total compensation
    be competitive with total compensation for comparable positions
    and performance at peers. The HRC granted the July 2015 RSRs
    following a mid-year evaluation of the senior executives'
    compensation and contributions to the Company's strong
    performance as part of an overall, balanced mix of competitive
    pay and to provide an incentive for those executives to
    continue their strong and effective leadership, consistent with
    the Company's compensation principles to pay for performance,
    to attract, retain, and motivate top executive talent, and to
    encourage the creation of long-term stockholder value.\9\
    ---------------------------------------------------------------------------
        \9\ Wells Fargo, 2016 Proxy Statement, at 53-54 (available online
    at https://www.sec.gov/Archives/edgar/data/72971/000119312516506771/
    d897049ddef14a.htm).

    Q.49. A recent CNNMoney report indicated that you received
    millions of dollars in compensation for increasing the number
    of ``primary consumer, small business, and banking checking
    consumers'' and for ``reinforcing a culture of risk management
    and
    accountability at the company.''\10\ Please provide details on
    all bonuses or incentive pay that you have received, based on
    performance related to ``cross-selling,'' increasing the number
    of consumers or consumer accounts. For each year, provide the
    total value of all such incentives received, and the criteria
    that qualified you for such incentives.
    ---------------------------------------------------------------------------
        \10\ http://money.cnn.com/2016/09/22/investing/wells-fargo-ceo-
    john-stumpf-200-million/index.html?iid=hp-stack-dom.

    A.49. As part of their investigation, the Independent Directors
    and the Human Resources Committee will review the extent to
    which Mr. Stumpf's compensation was based on performance
    related to cross-selling or upon metrics that included
    ---------------------------------------------------------------------------
    unauthorized accounts.

    Q.50. Please describe your full compensation package and
    benefits plan, including base salary, incentive compensation,
    and any retirement benefits such as a 10b5-1 plan, including
    the dollar values of such packages and benefits.

    A.50. In 2015, Mr. Stumpf received the following
    compensation:\11\
    ---------------------------------------------------------------------------
        \11\ Wells Fargo, 2016 Proxy Statement, at 57 (available online
    https://www.sec.gov/Archives/edgar/data/72971/000119312516506771/
    d897049ddef14a.htm).
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    ---------------------------------------------------------------------------
        \12\ Mr. Stumpf agreed to forfeit this award. See Wells Fargo,
    ``Independent Directors of Wells Fargo Conducting Investigation of
    Retail Banking Sales Practices and Related Matters (press release)''
    (Sept. 27, 2016) (available online at https://www.wellsfargo.com/about/
    press/2016/independent-directors-investigation_0927/.
    ---------------------------------------------------------------------------

    ---------------------------------------------------------------------------
        \13\ Mr. Stumpf agreed to forfeit this award. See Id.
    ---------------------------------------------------------------------------
        Mr. Stumpf participated in, and other Wells Fargo
    executives participate in the same benefit programs generally
    available to all team members, including health, disability,
    and other benefit programs, which include the Company 401(k)
    Plan (with a company match and potential discretionary profit
    sharing contribution) and, for team members hired prior to July
    1, 2009, the Company's qualified Cash Balance Plan (frozen in
    July 2009). The Company matched up to 6 percent of eligible
    participants' certified compensation during 2015 and, in
    January 2016, the Human Resources Committee of the Board of
    Directors authorized a discretionary profit-sharing
    contribution of 1 percent of each eligible participant's
    certified compensation under the Company 401(k) Plan based on
    the Company's 2015 performance.
        Certain executives, together with team members whose
    covered compensation exceeds IRC limits for qualified plans,
    also participated in nonqualified Supplemental 401(k) and
    Supplemental Cash Balance Plans prior to those plans being
    frozen in July 2009. Following the freezing of the plans, the
    Company no longer makes
    additional contributions for participants in these plans,
    although additional investment income continues to accrue to
    participants'
    individual accounts at the rates provided for in the plans.
    Certain executives and certain other highly compensated team
    members also can participate in our Deferred Compensation Plan.
    Effective January 1, 2011, the Company amended this plan to
    provide for supplemental Company matching contributions for any
    compensation deferred into the Deferred Compensation Plan by a
    plan participant, including Mr. Stumpf, that otherwise would
    have been eligible (up to certain IRS limits) for a matching
    contribution under the Company's 401(k) Plan.\14\
    ---------------------------------------------------------------------------
        \14\ Wells Fargo, 2016 Proxy Statement, at v, 55-56 (available
    online at https://www.sec.gov/Archives/edgar/data/72971/
    000119312516506771/d897049ddef14a.htm).
    ---------------------------------------------------------------------------
        The HRC has intentionally limited perquisites to executive
    officers. In 2015, for security or business purposes, the
    Company provided a car and driver to Mr. Stumpf and from time
    to time to certain other executives, primarily for business
    travel and occasionally for commuting. In addition, the HRC may
    from time to time approve security measures if determined to be
    in the business interests of our Company for the safety and
    security of our executives and other team members. In 2012, the
    HRC approved residential security measures for certain
    executives and, in 2015, the Company paid for the cost of
    regular maintenance for the previously installed home security
    systems for certain of our executives. From time to time the
    Company may pay the cost for a named executive's spouse to
    attend a Wells Fargo business-related event where spousal
    attendance is expected. All perquisites for Mr. Stumpf during
    2015 did not exceed $10,000.\15\
    ---------------------------------------------------------------------------
        \15\ Wells Fargo, 2016 Proxy Statement, at v, 55-56, 59 (available
    online at https://www.sec.gov/Archives/edgar/data/72971/
    000119312516506771/d897049ddef14a.htm).
    ---------------------------------------------------------------------------
        The Company does not provide our executives with 10b5-1
    plans, and none of our executive officers participate in a
    10b5-1 plan related to Wells Fargo common stock.

    Q.51. As was requested of you at the hearing, please provide
    information on all senior executives at Wells Fargo who
    suffered any
    financial consequence as a result of the practices at issue
    here.

    A.51. The Independent Directors of the Board of Directors of
    Wells Fargo announced on September 27, 2016, that they have
    launched an independent investigation into the Company's retail
    banking sales practices and related matters. A Special
    Committee of Independent Directors is leading the
    investigation, working with the board's Human Resources
    Committee and independent counsel.
        The Independent Directors have taken a number of initial
    steps they believe are appropriate to promote accountability at
    the Company. They have agreed with Mr. Stumpf that he will
    forfeit all of his outstanding unvested equity awards, valued
    at approximately $41 million. In addition, he will not receive
    a bonus for 2016.
        Ms. Tolstedt has left Wells Fargo. She has agreed to not
    exercise any outstanding stock options previously awarded by
    Wells Fargo until the completion of the board of directors'
    investigation and that, at the conclusion of this
    investigation, the board (or the Independent Directors of the
    Board or the Human Resources Committee, through board
    delegation) will have the authority to determine the extent to
    which such options will be forfeited.
        On September 27, 2016, the board announced that the
    Independent Directors had determined that Ms. Tolstedt would
    forfeit all of her unvested equity awards, valued at
    approximately $19 million, and that she will not receive a
    bonus for 2016 and will not receive any retirement enhancements
    or severance package in
    connection with her separation from Wells Fargo. No incentive
    compensation was granted as a result of Ms. Tolstedt's
    separation, and none of her equity awards will be ``triggered''
    or otherwise increased or accelerated by her separation.\16\
    ---------------------------------------------------------------------------
        \16\ Wells Fargo, ``Independent Directors of Wells Fargo Conducting
    Investigation of Retail Banking Sales Practices and Related Matters
    (press release)'' (Sept. 27, 2016) (available online at https://
    www.wellsfargo.com/about/press/2016/independent-directors-
    investigation_0927/).
    ---------------------------------------------------------------------------
        These initial actions will not preclude additional steps
    being taken with respect to Mr. Stumpf, Ms. Tolstedt or other
    employees as a consequence of the information developed in the
    investigation.
    Forced Arbitration and Secret Settlements
    Q.52. Please provide a copy of the current basic customer
    agreement and any other customer agreements that have been in
    place since 2007 for Wells Fargo customers that open credit
    cards or bank accounts.

    Q.53. Between 2007 and September 2016, how many customer
    complaints related to the allegations in the CFPB settlement
    were settled via the arbitration process? (i.e., how many total
    cases were heard?) In how many cases did the arbitrator rule
    for the customer and in how many did the arbitrator rule for
    Wells Fargo?

    Q.54. In cases where the arbitrator ruled for the customer,
    what remediation was made to customers? What was the average
    settlement amount?

    Q.55. In cases where customers took cases to arbitration, did
    secrecy clauses prevent them from making any information about
    their grievances public?

    Q.56. Did Wells Fargo disclose to investors or the public any
    cases where arbitrators ruled in favor of customers in these
    cases? How and when did the company do so?

    Q.57. Between 2007 and 2016, did Wells Fargo settle any cases
    related to the allegations in this settlement outside the
    arbitration system? If so, how many cases were settled in this
    fashion? Please explain.

    Q.58. As was requested at the hearing, will Wells Fargo commit
    to permitting customers bringing disputes related to these
    actions to bring their claims in court, rather than forcing
    them into
    arbitration?

    A.52.-A.58. Wells Fargo believes that the use of arbitration is
    a fair and efficient process that serves the needs of both
    parties. Nevertheless, Wells Fargo is offering a no-cost
    mediation program to customers, in addition to arbitration. We
    believe these options provide a fair and efficient means of
    remediating any harm.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                    ------

     RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN FROM JOHN G.
                                 STUMPF

    Q.1.a. Please describe the personnel structure of the Community
    Banking division of Wells Fargo Bank, N.A., including:
        The name of each position, the description of each
    position's responsibilities, and whether each position is
    salary or hourly;\1\
    ---------------------------------------------------------------------------
        \1\ Please note that we are responding to these Questions for the
    Record based on information we have available at this time.
    Investigations relating to these issues are ongoing, and we expect to
    learn more as they reach conclusions.

    A.1.a. The improper sales practices at issue occurred in the
    Regional Bank, which is a line of business within Community
    Banking. Below is a table that identifies the primary positions
    in the Regional Bank and for each position provides (1) average
    headcount, (2) Fair Labor Standards Act (``FLSA'') overtime
    classification, (3) median hourly base pay, (4) median Full
    Time Equivalent (FTE) base pay, and (5) average annual overtime
    hours for nonexempt positions. The table is followed by a
    description of each position's responsibilities. In addition,
    all salaried and hourly team members classified as regular or
    part-time (i.e., those who are regularly scheduled to work 17.5
    hours or more per week) are eligible for Wells Fargo-sponsored
    benefits, including health insurance, life insurance, dental
    and vision insurance, short- and long-term disability, 401(k)
    plan, and paid parental leave.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    ---------------------------------------------------------------------------
        \2\ Data reported based on 2015 annual headcount.
    ---------------------------------------------------------------------------

    ---------------------------------------------------------------------------
        \3\ Data reported as of September 1, 2016.
    ---------------------------------------------------------------------------

    ---------------------------------------------------------------------------
        \4\ Median FTE base pay calculated as hourly rate X 2080.
    ---------------------------------------------------------------------------

    ---------------------------------------------------------------------------
        \5\ Data reported based on 2015 overtime.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The job descriptions for these positions are as follows:
    Teller
        Tellers in the Regional Bank primarily perform the
    following functions:

       LGreeting customers;

       LProcessing transactions for customers;

       LFinding ways to make financial services more
            convenient for customers;

       LReferring customers with more complex needs to
            Wells Fargo bankers and other internal partners; and

       LAccurately maintaining and balancing a cash drawer.
    Customer Sales and Service Representative (CSSR)
        CSSRs in the Regional Bank primarily perform the following
    functions:

       LProviding excellent and prompt service in all
            customer interactions to ensure satisfaction;

       LFollowing up with customers who are referred by
            tellers based on confirmed needs;

       LCompleting teller job duties as necessary; and

       LBased on the specific branch needs, a CSSR may
            spend a portion of his or her time handling cash
            transactions.
    Personal Banker
        Personal Bankers in the Regional Bank primarily perform the
    following functions:

       LHaving conversations with customers and conducting
            detailed financial reviews, offering products and
            services that meet their needs and help them succeed
            financially;

       LContacting customers by phone to follow up to
            ensure customer satisfaction, build relationships, and
            address any additional financial needs based on the
            customers' financial priorities;

       LSetting performance objectives and working with
            branch manager to increase effectiveness in serving
            customers and meeting their financial needs;

       LBuilding loyalty while helping customers with
            service requests; and

       LMay handle cash transactions.
    Business Banking Specialist
        Business Banking Specialists in the Regional Bank primarily
    perform the following functions:

       LProactively growing and deepening relationships
            with existing small business customers as well as
            actively prospecting for new Wells Fargo small business
            and retail customers;

       LAttempting to earn all of the business of a small
            business owner, including their consumer and small
            business needs, while ensuring retention and exercising
            excellent customer service in all customer
            interactions;

       LChampioning for small business and bringing focus
            and attention to small business opportunities;

       LOffering deposit, lending, and other small business
            product solutions in order to serve as an expert to
            meet the customer's needs and financial goals;

       LProviding product delivery and service support to
            retail customers; and

       LReaching out into the community by visiting
            businesses, making outbound calls to customers, and
            conducting educational seminars in the community.
    Service Manager
        Service Managers in the Regional Bank primarily perform the
    following functions:

       LAssisting with hiring, training, coaching and
            developing a highly engaged service team;

       LFilling in for the Store Manager when necessary;

       LObserving, coaching, and providing feedback to
            ensure consistent service team performance and
            excellent customer satisfaction;

       LManaging complex customer concerns and
            transactions;

       LEnsuring compliance with all operational
            regulations, sales and service processes, policies and
            procedures, and completion of compliance requirements;
            and

       LAssisting with effective scheduling, managing the
            Teller line, lobby management, and delegating essential
            tasks to ensure operational integrity while creating a
            positive customer experience.
    Store Manager
        Store Managers in the Regional Bank primarily perform the
    following functions:

       LDeveloping in-depth knowledge about products and
            systems;

       LUsing initiative and good judgment to manage the
            branch's expense budget and lead the store to achieve
            projected performance;

       LSupporting the Service Manager and observing,
            coaching, and providing feedback to the service team;

       LHiring, coaching, training, scheduling, and
            developing all branch team members to achieve
            performance objectives;

       LManaging the store's compliance requirements; and

       LHolding team members accountable for the delivery
            of exceptional customer service, performance
            expectations, and operational integrity.
    Private Banker
        Private Bankers in the Regional Bank primarily perform the
    following functions:

       LProviding full-service banking to high-value
            customers and overseeing a portfolio of simple and/or
            packaged-product account relationships;

       LConsulting with customers regarding financial
            needs, recommending product/solutions, and financial
            services to meet those needs;

       LResolving inquiries, opening and servicing accounts
            such as checking, savings, credit/loan, and identifying
            investment
            opportunities;

       LPartnering and/or acting as a liaison to other
            business partners and working to deepen customer
            relationships by offering partner products and services
            to existing clients; and

       LBuilding a network of internal and external sources
            and
            resources to further enhance the customer experience
            and meet the customer's needs.
    District Manager
        District Managers in the Regional Bank primarily perform
    the following functions:

       LManaging multiple Wells Fargo locations, each with
            one line of business that provide products and services
            to a designated marketplace;

       LDeveloping and implementing sales and service
            strategy, as well as the locations' retail banking,
            marketing, and performance plans;

       LWorking with staff to develop and implement
            individual performance objectives against established
            standards;

       LManaging the relationship with various partner
            business entities to ensure the ability to deepen
            customer relationships along with managing service
            quality to ensure ongoing customer satisfaction;

       LServing as the sales product and services manager
            and providing formal and informal training;

       LImplementing and maintaining prescribed security
            controls while managing within the framework of Wells
            Fargo standards, policies, and procedures; and

       LActively participating and representing Wells Fargo
            in various community, civic, and professional
            organizations.

    Q.1.b. The number of employees in each position;

    A.1.b. Please see the response to the first bullet point of
    Question 1 above for additional detail. Currently,
    approximately 75,000 team members work in the Regional Bank.

    Q.1.c. The median salary of each salaried position;

    A.1.c. Please see the response to the first bullet point of
    Question 1 above.

    Q.1.d. The median hourly wage of each hourly position;

    A.1.d. Please see the response to the first bullet point of
    Question 1 above.
        Wells Fargo has set its own minimum pay at $12.00/hour
    effective March 2016, which is significantly higher than the
    Federal minimum wage of $7.25. In addition, all salaried and
    hourly team members who are classified as regular or part-time
    (i.e., regularly scheduled to work 17.5 hours or more per week)
    are eligible for Wells Fargo-sponsored benefits, including
    tuition reimbursement, healthcare insurance, dental insurance,
    vision insurance, life insurance, short- and long-term
    disability, 401(k) plan, and paid parental leave.

    Q.1.e. Average overtime hours worked for each position; and

    A.1.e. Please see the response to the first bullet point of
    Question 1 above.
        Wells Fargo's policy states that non-exempt team members
    are compensated for all hours worked, including all overtime
    hours. Wells Fargo's Team Member Handbook states:

            If you're in a nonexempt position, you are entitled to pay for
            all hours actually worked, even those exceeding your regular
            schedule or those not authorized before working them.
            Therefore, you must report all hours worked in Time Tracker.
            Wells Fargo supports and enforces this policy and wage and hour
            compliance.

    Q.1.f. Whether each position is considered to be exempt or
    nonexempt for FLSA purposes and the justification for any
    exemptions.

    A.1.f. Please see the response to the first bullet point of
    Question 1 above.
        At the time each new job is created, Wells Fargo completes
    an analysis of job duties to determine FLSA classification. The
    Wells Fargo Compensation Team also periodically reviews jobs or
    adjusts job classification as necessary in accordance with
    current regulations and court decisions.
                                    ------

      RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED FROM JOHN G.
                                 STUMPF

    Q.1. Through the lens of my service on both this Committee and
    the Armed Services Committee, I have been focused on the well-
    being of our service members in the consumer finance
    marketplace because predatory lending and personal financial
    issues can have a real impact on military readiness. This is
    why I worked on a bipartisan basis to establish the Office of
    Service member Affairs at the CFPB. Can you please tell me how
    many of the harmed customers are service members or veterans?

    A.1. Wells Fargo is committed to serving our service member
    customers. We are grateful for their significant sacrifices to
    our country and are honored to serve their banking needs.
        We asked PricewaterhouseCoopers (PwC) to analyze
    approximately 82 million deposit accounts for instances of
    potential simulated funding and approximately 11 million credit
    card accounts for instances of lack of authorization. The
    accounts reviewed were opened between 2011 and 2015. Of the
    accounts reviewed, PwC found that approximately 623,000
    consumer and business credit card accounts could have been
    [emphasis added] unauthorized, and approximately 1.5 million
    deposit accounts could have [emphasis added] experienced
    simulated funding, that is, the unauthorized deposit and
    withdrawal of funds intended to create the false appearance
    that the account was being used by the customer. PwC did not
    [emphasis added] conclude that any of these
    accounts were unauthorized and/or experienced simulated
    funding; it just could not rule out these possibilities. In
    that way, its analysis of credit card authorization and
    potential simulated funding in deposit accounts was designed to
    be over-inclusive. We took this intentionally expansive
    approach because we were willing to refund fees to customers
    who, in fact, approved account openings, but subsequently
    allowed the accounts to lapse, so that we did not exclude
    customers who may have suffered harm.
        We have found indications that the PwC number includes
    accounts where the customer authorized its opening. For
    example, Wells Fargo has worked to contact customers with open,
    inactive credit card accounts identified by PwC (i.e., the
    customers with accounts that could have been [emphasis added]
    unauthorized) to determine whether they want these credit
    cards. Approximately 25 percent have informed the bank that
    they either did not apply, or did not recall whether or not
    they applied, for their card.
        Of the 2.1 million accounts that PwC identified, 5,089
    accounts were associated with customers who are identified in
    the Defense Manpower Data Center (DMDC) as being active duty,
    reserve, or National Guard. In other words, less than 0.3
    percent of the accounts identified by PwC were associated with
    customers who are identified in the DMDC.
        We are committed to making it right for all customers--
    including any customer who is a service member or veteran. This
    includes refunding any fees that were assessed on unauthorized
    accounts, correcting credit bureau reporting, and addressing
    any other forms of harm.

    Q.2. In the most recent proxy statement dated March 16, 2016,
    Wells Fargo discloses its intention to structure compensation
    packages so that they are tax deductible under Section 162(m)
    of the Internal Revenue Code. In Wells Fargo's last tax filing,
    what was the value of these 162(m) deductions? What is the
    cumulative value of these 162(m) deductions taking into account
    the value of each and every 162(m) deduction Wells Fargo has
    ever taken?

    A.2. Wells Fargo is proud to be a valuable partner to the
    communities we serve and pays all required Federal, State, and
    local taxes.
        Wells Fargo reports executive compensation on its Federal
    income tax return according to the rules in the Internal
    Revenue Code, including the rules under Section 162(m). The
    amount of executive compensation paid by Wells Fargo is
    reported on its proxy statement filed annually pursuant to the
    Securities Exchange Act of 1934. For example, Wells Fargo's
    2015 proxy statement reports that the 2015 compensation paid to
    Wells Fargo's executive leadership was as follows:\1\
    ---------------------------------------------------------------------------
        \1\ Wells Fargo, 2016 Proxy Statement, at 57 (available online at
    https://www.sec.gov/Archives/edgar/data/72971/000119312516506771/
    d897049ddef14a.htm).
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    ---------------------------------------------------------------------------
        \2\ Mr. Stumpf agreed to forfeit this award. See Wells Fargo,
    ``Independent Directors of Wells Fargo Conducting Investigation of
    Retail Banking Sales Practices and Related Matters (press release)''
    (Sept. 27, 2016) (available online at https://www.wellsfargo.com/about/
    press/2016/independent-directors-investigation_0927/).
    ---------------------------------------------------------------------------

    ---------------------------------------------------------------------------
        \3\ Mr. Stumpf agreed to forfeit this award. See Id.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    ---------------------------------------------------------------------------
        \4\ The Independent Directors determined in September 2016 that Ms.
    Tolstedt would forfeit all outstanding equity awards.
    ---------------------------------------------------------------------------
    Q.3. In the Consent Order with the CFPB, Wells Fargo agreed not
    to take advantage of tax loopholes to write off portions of
    fines and civil penalties from its Federal taxes. But because
    loopholes in the tax code are so broad and unclear, Wells Fargo
    could still claim a business deduction for money it reimburses
    to its victims. Your company agreed to pay consumers for the
    harm it caused, and it should pay in full without help from
    American taxpayers. Will you commit now that Wells Fargo will
    not take any deduction for the amounts it pays under the
    Consent Order?

    A.3. Wells Fargo is currently reviewing these issues as they
    relate to various tax implications. As noted in our response to
    Question 2 above, Wells Fargo pays all required Federal, State,
    and local taxes.

    Q.4. In light of the revelations of unauthorized accounts being
    opened, could you please describe how you are confident Wells
    Fargo is still in compliance with anti-money laundering rules
    and regulations?

    A.4. Wells Fargo has policies, procedures, and internal
    controls that are reasonably designed to comply with applicable
    anti-money laundering laws and regulations.

    Q.5. Did you or any member of the Wells Fargo Operating
    Committee specifically notify Wells Fargo employees in writing
    that using a customer's identification information to open
    unauthorized accounts would not only be unethical, but also
    unlawful? If so, please provide this written material,
    indicating the date(s) on which this material was shared with
    employees.

    A.5. Language prohibiting the opening of unauthorized accounts
    has existed for several years in sales integrity and ethics
    training materials, and as part of essential learning paths,
    among other communications Wells Fargo makes to its team
    members.
        Additionally, business ethics are discussed in quarterly
    Company-wide townhalls. Specifically, Mr. Stumpf addressed the
    unauthorized accounts issues during a townhall meeting
    following the December 2013 Los Angeles Times story. During
    that townhall, Mr. Stumpf informed team members that he
    ``want[ed] to address'' the issues discussed in the article
    ``head on.'' Of note, he said:

            Our culture is about service. We want to help our customers
            succeed financially, and we're not in the product pushing
            business. Think of . . . yourselves . . . no matter what
            business you're in, whether you help those who service our
            external customers or if you serve them directly, I think of
            all of us as being financial physicians. We meet our customers
            . . . and we have a conversation with them. And we listen
            carefully for their needs. And once we discover a need, we then
            through our skill set, understanding, and experience, our
            value-add, we offer a product or a service or a series of
            products and services to help them. We don't try to sell them
            something that they don't need or don't want[.]\5\
    ---------------------------------------------------------------------------
        \5\ Hollywood, FL, Town Hall, February 5, 2014 (Transcript on
    file).

            Here's my ask of you and for everybody listening today. If you
            believe that your team, your boss, your boss' boss somehow is
            putting pressure on you to sell things that your customers
            don't want, don't need, raise your hand . . . And if you're not
            comfortable doing that, there's an anonymous . . . EthicsLine,
            [or you can] talk to somebody in HR. We want to do the right
    ---------------------------------------------------------------------------
            thing. We're in the long-term business.

    Q.6. As of September 20, 2016, is it still possible that
    unauthorized customer accounts may be opened by Wells Fargo
    employees?

    Q.7. What changes have you made to better protect the
    identification information of your customers so that
    unauthorized accounts are never opened again?

    A.6.-A.7. Wells Fargo has made several recent changes to its
    policies and practices to enhance oversight, expand customer
    transparency, and improve the customer experience. We would
    like to highlight the following points:

       LWe have named a new head of our retail banking
            business.

       LWe have also changed the retail banking business's
            risk management processes. This is consistent with the
            reorganization of enterprise functions we have
            conducted across the Company to create a stronger risk
            and control foundation that allows senior team members
            across the Company to provide more independent,
            credible challenges to how we operate.

       LTo this end, we are transitioning a number of
            control functions out of the lines of business, which
            includes Community Banking, and centralizing them
            within Wells Fargo's independent corporate Risk
            function, which will be responsible for sales-practice
            oversight, as well as establishing an independent Sales
            Practices Office.

       LWe have made system and process enhancements,
            including sending automated confirmation emails to our
            customers when a new personal or small business
            checking account or a savings account is opened; and
            acknowledgements are also sent for credit card
            applications. We are also working to improve multi-
            factor authentication to protect our customers'
            information, and signatures are captured electronically
            approximately 99 percent of the time for new checking,
            savings, and credit card applications. In addition, we
            are closing automatically inactive new deposit accounts
            that, after 62 days, have a zero balance, without
            assessing a monthly fee.

       LThis year alone, we have committed more than $50
            million to enhanced quality assurance monitoring.

       LWe have expanded an independent third-party mystery
            shopper program, adding risk professionals to provide
            greater oversight, and expanding our customer complaint
            servicing and resolution process.

       LWe are surveying team members to understand their
            views on our Company's approach to ethics and
            integrity.

       LWe have also commenced the process with our
            regulators to engage an independent consultant to
            review sales practices in Community Banking. In
            addition, we will be engaging external consultants to
            review sales practices across the Company.

       LAnd we will be engaging outside independent culture
            experts to help us understand where we have cultural
            weaknesses that need to be strengthened or fixed.
                                    ------

    RESPONSES TO WRITTEN QUESTIONS OF SENATOR MENENDEZ FROM JOHN G.
                                 STUMPF

    Q.1. When did Wells Fargo first institute cross-selling
    strategies in the Community Banking Division? When did Wells
    Fargo first start encouraging employees to engage in strategies
    to boost sales, including but not limited to gaming, pinning,
    sandbagging, bundling, and simulated funding? Please provide
    copies of any company materials sent to retail banking
    employees regarding cross-selling strategies.

    A.1. ``Cross-selling'' is the term Wells Fargo uses to describe
    its strategy for deepening its relationships with its
    customers, and this strategy has been present in some form at
    Wells Fargo since at least 1999.\1\ Wells Fargo offers a
    variety of financial products and services. When an existing
    customer has a financial need that Wells Fargo can fulfill with
    a product or service that the customer does not have, Wells
    Fargo wants to ensure that the customer is made aware that the
    Company can fulfill that particular financial need. To do this,
    Wells Fargo trains our team members to listen to our customers,
    consider their financial needs, determine which Wells Fargo
    product or service can fulfill that need, and offer that
    product or service to the customer.
    ---------------------------------------------------------------------------
        \1\ Wells Fargo, 1999 Annual Report, at 7 (available online at
    http://www.wellsfargo
    history.com/download/annualreports/1999annualreport_wf.pdf).
    ---------------------------------------------------------------------------
        This approach is called needs-based selling, and it is the
    essence of Wells Fargo's cross-selling strategy. This strategy
    enables Wells Fargo to deepen its relationships with its
    customers because Wells Fargo is fulfilling more of our
    existing customers' financial needs. Cross-sell numbers are
    therefore one metric for measuring relationship depth, and
    Wells Fargo has traditionally encouraged its team members to
    build and maintain strong customer relationships through needs-
    based selling. It does not benefit either Wells Fargo or its
    customers to open accounts that our customers do not need, use,
    or want.

    Q.2. When did Wells Fargo first institute product sales goals
    in the Community Banking Division? Please provide details on
    the structure of the sales goals and the specific thresholds
    employees were required to meet.

    A.2. Product sales goals have been present at Wells Fargo in
    some form since at least the early 2000s. The specific goals
    have varied across markets and years, and from 2012 to 2015,
    Wells Fargo steadily reduced sales goals for Regional Bank team
    members. Wells Fargo has now eliminated product sales goals
    entirely for Regional Bank team members who serve customers in
    our retail branches, effective October 1, 2016.

    Q.3. For the employees required to meet product sales goals in
    the Community Banking Division, on average, what percentage of
    their pay was based on meeting and/or exceeding sales
    thresholds?

    A.3. Please see question 7, below.

    Q.4. Has there been any attempt to quantify how many customers
    succumbed to pressure from bank employees to sign up for bank
    products they did not need or want? Will Wells Fargo attempt to
    identify these customers?

    A.4. Wells Fargo has worked to contact holders of an open
    consumer or small business credit card account that the third-
    party consulting firm, PricewaterhouseCoopers (PwC) identified
    as never having been used and never having been ``fraud
    activated'' by the customer calling an 800 number after
    receiving the card, unless there were indications of customer
    consent, under the assumption that non-activation may indicate
    a customer's lack of desire or need for the account. The
    purpose of contacting these inactive credit card account
    holders is to determine whether they want these credit cards.
    Approximately 25 percent have informed the bank that they
    either did not apply, or did not recall whether or not they
    applied, for their card. For those customers who want the
    credit card, the card will remain open. For those customers who
    want the credit card, the account will remain open. For any
    customer who does not want their credit card, Wells Fargo is
    closing the account and correcting credit bureau reporting.
    This means we are removing the account from the customers'
    credit reports going forward and suppressing the existence of
    the inquiry so that it is not viewable to other lenders or
    requestors. (The Fair Credit Reporting Act prohibits us
    removing the inquiry altogether and it will still be visible to
    customers pulling their own credit reports.) These results
    demonstrate that PwC's findings were over-inclusive, containing
    accounts where the customer authorized the opening of the
    account.

    Q.5. Does Wells Fargo utilize cross-selling strategies or other
    similar initiatives across any of its other divisions? If so,
    please describe the structure of the sales programs and any
    related
    incentives.

    A.5. Businesses may sometimes use the terms ``referral
    program'' and ``cross-sell'' interchangeably. These programs
    exist across the Company and might typically involve:

       LA line of business referring a customer to another
            group or line of business at Wells Fargo for a product
            or service offered by that separate group; or

       LA line of business that is unable to approve a
            customer's request for a product, helping the customer
            pursue an alternative product or service from another
            line of business.

        Please refer to our answer to question 6, below, for
    additional information on this topic.

    Q.6. Does Wells Fargo provide compensation incentives based on
    meeting product sales goals in any of its other divisions? If
    so, please describe the structure of the programs and the
    specific thresholds employees are required to meet.

    A.6. Wells Fargo tailors its compensation structure to each
    line of business, the services our team members perform,
    compliance with applicable laws, and the best interests of our
    customers. Incentive compensation plans require ongoing
    compliance with Wells Fargo's Code of Ethics and Business
    Conduct, Information Security Policy, Risk Management
    Accountability Policy, and other employment and compliance
    requirements applicable to the role. Violations may subject the
    team member to disqualification from the plan or downward
    adjustments to the incentive award.
        None of our incentive plans currently have minimum product-
    specific sales goals as a condition of eligibility for an
    incentive; however, many of our plans have minimum revenue or
    volume production thresholds that must be met to qualify for an
    incentive.
        As Wells Fargo previously announced, product sales goals
    for our Regional Bank team members who serve customers in our
    retail branches have been eliminated. This means there are no
    minimum product-specific sales goals and no minimum revenue or
    volume production thresholds for this group of team members.
    However, two Community Banking business groups separate from
    the retail banking business--Practice Finance (which provides
    financial services to medical-related businesses) and Business
    Payroll Services--are eligible for compensation incentives. The
    incentive plans offered to team members in these two business
    groups do not involve product sales goals: Practice Finance
    incentives are based on funded volume goals, and Business
    Payroll Services incentives are based on revenue goals.
        Several business groups outside Community Banking--such as
    Consumer Lending, Wealth and Investment Management, Wholesale
    Bank, Insurance, and Capital Finance--also offer incentive
    compensation plans to some of their team members. Many of these
    team members are in business development or sales roles,
    offering customers home mortgages, commercial loans, wealth
    management advice, insurance plans, or other Wells Fargo
    products and services. While some of these plans use production
    thresholds, many are predominately commission-based and have no
    product, revenue, or volume goals or thresholds.
        Wells Fargo is currently reviewing all of its incentive
    compensation plans to ensure the structures and production
    thresholds are appropriate to the roles and do not
    inadvertently incent inappropriate sales practices.

    Q.7. How many Wells Fargo employees, across all divisions, are
    eligible to receive compensation based on meeting and/or
    exceeding product sales goals? For those employees, on average,
    what percentage of their pay is based on meeting and/or
    exceeding product sales goals?

    A.7. Please see our response to Question 6 above for
    information about Wells Fargo's incentive plans across
    divisions that require minimum production thresholds (i.e., may
    be minimum revenue or minimum volume) as a condition of
    eligibility for incentive compensation. There are no minimum
    product-specific sales goals.
        With respect to the Regional Bank team members, as Wells
    Fargo previously announced, effective October 1, 2016, product
    sales goals for our Regional Bank team members in our bank
    branches have been eliminated. Leading up to the elimination of
    product sales goals, the actual incentive payouts based on
    sales-related performance objectives (distinct from service and
    other performance objectives) declined considerably: the median
    incentive paid as a percentage of total salary for sales-
    performance incentives for tellers, for example, declined from
    4.6 percent in 2011 to 0.9 percent in 2015. Historically, the
    target incentive payment for overall performance objectives,
    not just sales-related objectives, was approximately 3 percent
    of base compensation for tellers and the target for the
    majority of personal bankers was approximately 10 percent of
    base compensation. All incentive plans were capped.
        We are currently reviewing our compensation structures with
    respect to other Wells Fargo team members to ensure all
    incentive programs are properly aligned with the interests of
    our customers.

    Q.8. What does Wells Fargo plan to do to address the issue of
    the bank targeting individuals holding Mexican Matricula
    Consular Cards, as raised in the Los Angeles City Attorney's
    May 5, 2015, complaint?

    A.8. Wells Fargo is committed to rectifying this situation for
    all customers, regardless of the type of identification used to
    open an account. This includes refunding any fees that were
    assessed on unauthorized accounts, correcting credit bureau
    reporting, and addressing any other forms of harm.

    Q.9. Please provide the proportion of the employees terminated
    who are: racial/ethnic minorities, military/veterans, and
    persons with disabilities.

    A.9. Of the 5,300 team members whose employments were
    terminated for sales-integrity violations from 2011 to 2015, 39
    percent were white, 33 percent were Hispanic, 15 percent were
    black/African American, 1.9 percent self-identified as veteran,
    and 0.7 percent self-identified as having a disability.

    Q.10. How does Wells Fargo plan to address and remediate the
    multiple reports of former employees who were fired or demoted
    after refusing to open fake accounts, including those employees
    who called the bank's ethics hotline about what they had
    witnessed? What steps will Wells Fargo take to reform its
    internal processes to ensure that employees have a mechanism to
    report fraudulent and illegal practices without facing
    retribution from their managers or the bank at large? How will
    Wells Fargo ensure the anonymity of employees who raise flags
    about questionable practices or behavior?

    A.10. Wells Fargo has long had internal processes in place for
    team members to raise issues or concerns through multiple
    channels, including managers, HR, Compliance, and/or the
    EthicsLine. We encourage team members to speak up if they
    experience or witness something that makes them feel
    uncomfortable and have measures in place to protect team
    members from retaliation. The EthicsLine provides team members
    with a confidential way to report possible violations of Wells
    Fargo's Code of Ethics and Business Conduct or any laws, rules,
    or regulations. Team members have the option to remain
    anonymous through the EthicsLine. It is available to all team
    members (U.S. and international) 24-hours a day, 7-days a week,
    via toll-free telephone or online Web reporting. The EthicsLine
    has been operated and staffed by a third-party vendor since its
    inception in 2004, and translation services are available. This
    process helps ensure team member confidentiality and preserves
    anonymity when requested.
        All team members who call the EthicsLine are provided with
    an EthicsLine ID that is associated with their EthicsLine
    Report. Team members who elect to remain anonymous are asked to
    either call back to the EthicsLine or log into the EthicsLine
    Web Portal in 10 calendar days to provide additional
    information or answer any questions relating to their report.
    To further protect the integrity of the confidential hotline,
    the vendor does not record any data related to the incoming
    telephone calls or Web reports. Team members who self-identify
    are advised that since they provided their name and contact
    information, Wells Fargo now has the option to contact them
    directly if needed. They are also told they can call the
    EthicsLine at any time to provide additional information.
        Interview specialists with the EthicsLine vendor listen,
    ask clarifying questions if necessary, and then write a summary
    report of the call. The summary is then provided to Wells
    Fargo's Office of Global Ethics and Integrity for assessment
    and referral to the appropriate review team.
        Wells Fargo takes measures to protect team members from
    retaliation, including maintaining confidentially during the
    review process. Specifically:

       LAll reports of suspected unethical or illegal
            activities are taken seriously and measures are in
            place to ensure concerns are promptly evaluated and
            reviewed.

       LThe review of concerns in many cases will require a
            fact-finding that may involve interviews with
            individuals the Company determines may have information
            relevant to the underlying issue or concern. However,
            management of any review and updates regarding facts,
            progress, and outcomes are limited to only those who
            have a legitimate business need to know.

       LIt may be possible in some cases for the
            researcher/investigator to determine the identity of
            the team member due to the nature of the issue reported
            and the information shared by the team member. However,
            the researcher/investigator would not ask the team
            member to self-identify as the person who made the
            EthicsLine Report.

        In no circumstances is the team member told the specifics
    about any corrective action taken against another team member
    as it is not Wells Fargo's practice to discuss confidential
    information regarding one team member with another. Wells Fargo
    will only share information regarding the review, including any
    corrective action taken, with those who have a legitimate
    business need to know.
        Wells Fargo's Nonretaliation Policy, which is available to
    all team members in the Team Member Handbook and reiterated in
    the Code of Ethics and Business Conduct, mandates that no team
    member may be retaliated against for providing information in
    good faith about suspected unethical or illegal activities,
    including fraud, securities law, or regulatory violations, or
    possible violations of any Wells Fargo policies. Retaliatory
    behavior has always been, and continues to be, grounds for
    corrective action, up to and including termination of
    employment. Team members who believe that they or someone else
    has been retaliated against for reporting an issue are
    instructed to report it as soon as possible to their supervisor
    or manager, H.R. Advisor team, or Corporate Employee Relations,
    to ensure that a prompt review is conducted and, where
    appropriate, corrective action is taken. Team members can also
    report retaliation concerns via the EthicsLine.
        Wells Fargo has additional safeguards to prevent any form
    of
    retaliation, including the fact that Wells Fargo's Human
    Resources personnel are typically consulted in every
    termination decision.
    Additionally, team members whose employments have been
    terminated may utilize Wells Fargo's termination review process
    to request to have that decision reviewed by a Corporate
    Employee
    Relations professional who was not previously consulted in the
    termination decision.
        To further strengthen our program and foster an environment
    where all team members feel comfortable escalating matters
    without fear of retaliation, we are making improvements to the
    program, including:

       LEnhancing our Company-wide standards to ensure a
            consistent team member experience and safeguards,
            regardless of the type of issue reported or which group
            is conducting the research or investigation.

       LReinforcing our standards and processes that
            protect team members from retaliation. This will
            include requiring that the appropriate review unit
            evaluating the underlying issues or concerns must
            provide a reminder of the Company's Nonretaliation
            Policy to all individuals interviewed or contacted as
            part of the review, as well as all managers who may be
            part of any corrective action decisions arising out of
            the review.

       LEnsuring that reports of suspected unethical or
            illegal activities are evaluated, investigated, and
            appropriately escalated in a timely and confidential
            manner by continually monitoring and refining our
            EthicsLine research and investigative processes. This
            will include the adoption of Speak Up, Investigative,
            and Nonretaliation Standards to help guide the research
            and investigative process.

       LCreating additional training, communications, and
            resources to help team members understand their
            responsibilities under the Code of Ethics and Business
            Conduct and related policies, the importance of
            speaking up, and what to do when faced with an ethical
            dilemma.

        With respect to allegations from former team members who
    claim that their employment was terminated or they were demoted
    after refusing to open unauthorized accounts and/or after
    reporting concerns to the EthicsLine, we are reviewing each of
    the situations. As described above, team members have the
    option to raise concerns anonymously, so Wells Fargo likely
    will not have records identifying former team members who
    raised concerns anonymously through the EthicsLine.
    Nevertheless, Wells Fargo is taking steps to review such
    corrective action decisions where possible and has engaged
    outside consultants to help us with this review. Moreover,
    Wells Fargo has established a process to enable former team
    members who contact the Company today to request a review of
    their termination, even if they did not utilize the Company's
    termination appeal and review processes at the time of their
    departure. Former team members who did utilize the Company's
    appeal processes in the past will be provided with an
    additional review. Former team members who express interest in
    reemployment and are deemed to be eligible for reemployment
    through this review process will be able to work with a special
    recruiting team to assist in exploring opportunities at Wells
    Fargo.
                                    ------

     RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER FROM JOHN G.
                                 STUMPF

    Q.1. One of the things that concerns me about this settlement
    is how your individual customers may have been impacted. I
    would like to know how many customers incurred overdraft fees
    or had missed payments as a result of accounts being opened
    without consent and, similarly, how FICO scores may have been
    impacted by new credit accounts being opened without consent?

    Q.2. You understand that new credit accounts and late payments
    impact a person's FICO score. In Virginia, 22,000 fraudulent
    deposit accounts and 19,000 fraudulent credit accounts were
    opened by Wells Fargo employees. How many customers might have
    been downgraded from Prime to Sub Prime as a result of this?

    Q.3. If FICO scores were indeed affected due to Wells Fargo's
    fraudulent behavior, resulting in denial of a loan in the
    future or a higher interest payment, how will you make this
    right for those customers?

    Q.4. I understand you have paid back $2.6 million to customers
    affected and the agreement is $5 million. Do you think that an
    average payment of $25 per customer is sufficient for the harm
    caused? Do you have any plans to expand customer compensation?

    A.1.-A.4. Wells Fargo is working very hard to remediate harm
    that may have been caused to our customers. To that end,
    pursuant to the Consumer Financial Protection Bureau (CFPB) and
    Office of the Comptroller of the Currency (OCC) Consent Orders,
    Wells Fargo will retain the services of an independent
    consultant and develop redress and reimbursement plans to
    identify the population of consumers who may have been affected
    by improper sales practices. We fully expect that, once
    approved by our regulators, the redress and reimbursement plans
    will encompass various forms of harm, including harm related to
    credit bureau inquiries, and that Wells Fargo will issue and
    track reimbursement payments.
        We asked PricewaterhouseCoopers (PwC) to analyze
    approximately 82 million deposit accounts for instances of
    potential simulated funding and approximately 11 million credit
    card accounts for instances of lack of authorization. The
    accounts reviewed were opened between 2011 and 2015. Of the
    accounts reviewed, PwC found that approximately 623,000
    consumer and business credit card accounts could have been
    [emphasis added] unauthorized, and approximately 1.5 million
    deposit accounts could have [emphasis added] experienced
    simulated funding, that is, the unauthorized deposit and
    withdrawal of funds intended to create the false appearance
    that the account was being used by the customer. In other
    words, PwC did not [emphasis added] conclude that these
    accounts were unauthorized and/or experienced simulated
    funding; it just could not rule out these possibilities because
    its analysis of credit card authorization and potential
    simulated funding in
    deposit accounts was intentionally designed to be over-
    inclusive. For example, PwC flagged all credit card accounts
    that were not used and were not ``fraud activated'' by the
    customer calling an 800 number after receiving the card, unless
    there were indications of customer consent, even though there
    are many reasons why a customer may not activate their card.
        Therefore, it is important to note PwC did not determine
    that ``22,000 fraudulent deposit accounts and 19,000 fraudulent
    credit accounts'' were opened in Virginia. Instead, PwC found
    that approximately 22,000 deposit accounts could have [emphasis
    added] experienced simulated funding and approximately 19,000
    credit card accounts in Virginia could have been [emphasis
    added] unauthorized.
        Of the subset of accounts identified, nationwide PwC
    determined that approximately 115,000 accounts were charged a
    fee, averaging less than $25 per account and totaling $2.66
    million in revenue to Wells Fargo. That figure is far surpassed
    by the costs associated with opening and closing the unused
    accounts. Wells Fargo has already made direct deposits and
    issued checks to refund these fees. We took this intentionally
    expansive approach because we were willing to refund fees to
    customers who, in fact, approved account openings, but
    subsequently allowed the accounts to lapse, so that we did not
    exclude customers who may have suffered harm.
        We have found indications that the PwC number includes
    accounts where the customer authorized its opening. For
    example, Wells Fargo has worked to contact customers with open,
    inactive credit card accounts identified by PwC (i.e., the
    customers with accounts that could have been [emphasis added]
    unauthorized) to determine whether they want these credit
    cards. Approximately 25 percent have informed the bank that
    they either did not apply, or did not recall whether or not
    they applied, for their card. These results demonstrate that
    PwC's findings as to the credit card accounts analyzed were
    over-inclusive, containing accounts where the customer
    authorized the opening of the account.
        For those customers who want the credit card, the account
    will remain open. For any customer who does not want their
    credit card, Wells Fargo is closing the account and correcting
    credit bureau reporting. This means we are removing the account
    from the customers' credit reports going forward and
    suppressing the existence of the inquiry so that it is not
    viewable to other lenders or requestors (the Fair Credit
    Reporting Act prohibits us removing the inquiry altogether and
    it will still be visible to customers pulling their own credit
    reports).
        Moreover, we are in the process of determining how many
    customers obtained a credit product, with Wells Fargo or
    another company, during the time period in which their credit
    score may have been impacted by an unauthorized credit inquiry
    or existence of the trade line. While it may be difficult to
    calculate the precise impact for every customer, our intent is
    to err on the side of the customer and make them whole for
    negative repercussions that were tied to a drop in their credit
    score. This could include impacts on pricing, line or loan
    size, or credit decision. We have allocated significant
    resources to this effort and are working with the credit
    bureaus to develop a plan for submission to our regulators.
        Going forward, Wells Fargo is voluntarily expanding its
    review of accounts to include 2009 and 2010. Moreover, Wells
    Fargo also provides resources to help customers request free
    credit reports and is offering a no-cost mediation option to
    impacted customers to help identify and remediate any other
    forms of harm.
        Ultimately, if any customer has any questions or concerns
    regarding his or her accounts--regardless of when those
    accounts were opened--he or she is invited to contact us so
    that Wells Fargo can address those questions or concerns.

    Q.5. Did you refer any of these individuals to law enforcement?
    If not, why not?

    A.5. Wells Fargo has policies, procedures, and internal
    controls that are reasonably designed to comply with its legal
    obligations to monitor, detect, and report suspicious
    activities. Under Federal law, Suspicious Activity Reports
    (``SARs''), and any information that would reveal the existence
    of a SAR, are confidential, 31 U.S.C.  5318(g)(2)(A)(i) and 12
    C.F.R.  21.11(k).

    Q.6. How did you miss this activity for such a long time? What
    have you changed about your internal controls to ensure this
    type of behavior does not happen again and, if it does, is
    caught at an earlier stage?

    A.6. This was a problem of focus. While information relating to
    sales-practice problems existed prior to 2013, it was believed
    that the problem was more isolated than it actually was. We
    were wrong.
        To ensure problems like this do not get missed again, Wells
    Fargo has made several recent changes to its policies and
    practices to enhance oversight, expand customer transparency,
    and improve the customer experience. We would like to highlight
    the following points:

       LWe have named a new head of our retail banking
            business.

       LWe have also changed the retail banking business's
            risk management processes. This is consistent with the
            reorganization of enterprise functions we have
            conducted across the Company to create a stronger risk
            and control foundation that allows senior team members
            across the Company to provide more independent,
            credible challenges to how we operate.

         LTo this end, we are transitioning a number of
            control functions out of the lines of business, which
            includes Community Banking, and centralizing them
            within Wells Fargo's independent corporate Risk
            function, which will be responsible for sales-practice
            oversight, as well as establishing an independent Sales
            Practices Office.

       LWe have eliminated product sales goals for all
            Regional Bank team members who serve customers in our
            retail branches.

       LWe have made system and process enhancements,
            including sending automated confirmation emails to our
            customers every time a new personal or small business
            checking account or a savings account is opened; and
            acknowledgements are also sent for credit card
            applications. We are also working to improve multi-
            factor authentication to protect our customers'
            information, and signatures are captured electronically
            approximately 99 percent of the time for new checking,
            savings, and credit card applications. In addition, we
            are closing automatically inactive new deposit accounts
            that, after 62 days, have a zero balance, without
            assessing a monthly fee.

       LThis year alone, we have committed more than $50
            million to enhanced quality assurance monitoring.

       LWe have expanded an independent third-party mystery
            shopper program, adding risk professionals to provide
            greater oversight, and expanding our customer complaint
            servicing and resolution process.

       LWe are surveying team members to understand their
            views on our Company's approach to ethics and
            integrity.

       LWe also have commenced the process with our
            regulators to engage an independent consultant to
            review sales practices in Community Banking. In
            addition, we will be engaging external consultants to
            review sales practices across the Company.

       LAnd we will be engaging outside independent culture
            experts to help us understand where we have cultural
            weaknesses that need to be strengthened or fixed.

    Q.7. It was only recently that you ended the incentives policy
    that apparently inspired the fraud. I have heard that Wells has
    had a culture of exercising pressure on employees to bring in
    accounts. Walk me through how you are going to change the
    overall culture at the retail bank. Have you hired independent
    auditors to suggest future changes to your compliance regime?

    A.7. Please see the response to Question 6 above for a detailed
    list of changes Wells Fargo is implementing to enhance
    oversight, expand customer transparency, and improve the
    customer experience.
        Senior management has recognized that there are issues that
    need to be fixed within our culture. There are weaknesses
    within it that we must change. Undue pressure on team members
    to do things inconsistent with our vision and values has no
    place in our culture. That is why the terminations over the
    last 5 years have included 483 managers, up to three levels
    above bankers and tellers, when investigations have found that
    managers engaged in or directed improper sales practices or
    exhibited excessive pressure and did not respond promptly and
    decisively to change their behavior. A team member has many
    avenues to escalate, including our anonymous EthicsLine. We
    take each matter seriously and enforce our Nonretaliation
    Policy.
        In addition to the steps outlined in Question 6 above,
    Wells Fargo has also increased training in many areas related
    to ethics and integrity. Currently, all team members in the
    retail banking business go through sales-integrity training as
    part of their Essential Learning Program when they begin at
    their positions, and are required to complete additional annual
    compliance training over the course of their careers. New
    training programs implemented in 2015 are tailored to the
    respective positions, and include scenario-based modules to
    help prepare team members for situations that they are likely
    to encounter in the course of their work. Wells Fargo Regional
    Bank team members are also required to complete approximately
    two dozen different modules of annual compliance training.
    Additionally, in 2012, Wells Fargo began requiring bankers to
    annually certify to having read the Sales and Service Quality
    Manual, which is updated every year to address emerging sales-
    integrity issues and specifically outlines proper and improper
    sales practices. Wells Fargo also began to implement an annual
    ``Leadership Summit'' in 2014 to provide additional training
    for all leadership personnel in the retail banking business
    (more than 850 District Managers, Area Presidents and Regional
    Presidents). This summit provides guidance on leading teams in
    a way that is consistent with sales ethics, including on
    incentivizing good behavior, and providing coaching to correct
    undesirable activities.
        Last, pursuant to the Consumer Financial Protection Bureau
    (CFPB) and Office of the Comptroller of the Currency (OCC)
    Consent Orders, Wells Fargo will retain the services of an
    independent consultant to review the Company's policies and
    procedures to determine if they are reasonably designed to
    ensure that Wells Fargo's sales practices comply with all
    applicable Federal consumer
    financial laws.

    Q.8. What percentage of compensation for the employees engaged
    in the wrongful behavior was derived from the cross-selling
    incentives? For example, if a banker earned $50,000 for the
    year, was 50 percent derived from cross-selling?

    A.8. For the terminated team members, the average incentive
    compensation (sales and service) was 3.3 percent of base
    salary. Sales incentives included incentives for Regional
    Banking products and cross-sell partner referrals. There were
    no specific percentages or delineation between the products, as
    both were components of the sales-related incentive metrics.

    Q.9. It looks like Carrie Tolstedt, the executive responsible
    for the retail unit, conveniently announced plans to retire
    over the summer and is walking away with up to $125 million, at
    least $45 million of which would not have vested had she been
    fired instead of allowed to retire, according to Fortune. How
    do you explain this in light of the obvious misbehavior in her
    unit? Why was she allowed to ``retire'' in the middle of your
    negotiations with regulators? Put another way, she was in
    charge of the retail unit. Why did you not terminate her
    employment?

    Q.10. Do you understand that some might find it odd that the
    complaint was filed in 2015, but this summer you referred to
    Carrie Tolstedt as a ``role model'' and ``standard-bearer for
    our culture?'' Do you think that the way that Ms. Tolstedt ran
    her division exemplifies your culture?

    A.9.-A.10. In early 2016, Mr. Stumpf, in consultation with
    Wells Fargo's Chief Operating Officer, decided that for various
    reasons the business would move in a different direction,
    meaning that Ms. Tolstedt would be removed from the leadership
    of the Community Bank, which took place effective July 31,
    2016. After Ms. Tolstedt was told of that decision, she decided
    that she would retire at the end of 2016. In September 2016 the
    board's Independent Directors determined that Ms. Tolstedt
    should immediately separate from Wells Fargo, that all of her
    unvested equity compensation, valued at approximately $19
    million, would be forfeited, that she would not receive a bonus
    for 2016, and that she could be subject to
    further compensation and other actions based upon the results
    of the Independent Directors' investigation. The Independent
    Directors also took steps to ensure that stock options awarded
    to Ms. Tolstedt in prior years would remain subject to
    forfeiture based upon the board's determinations following its
    investigation.\1\ Ms. Tolstedt has agreed to not exercise any
    outstanding stock options previously awarded by Wells Fargo
    until the completion of that
    investigation.
    ---------------------------------------------------------------------------
        \1\ Wells Fargo, September 27, 2016, Form 8-K, (available online at
    https://www.sec.gov/Archives/edgar/data/72971/000119312516722259/
    d266244d8k.htm).

    Q.11. I supported claw backs for executives who commit fraud,
    misstate earnings, or otherwise engage in wrongful behavior in
    Dodd-Frank. Why shouldn't aggressive claw backs, relating to
    the time period of this fraud (2011-2016), apply to all senior
    executives responsible for management of Wells Fargo? If you do
    not claw back a substantial amount of compensation, your
    shareholders will shoulder the burden of the $185 million in
    fines and restitution--do you think it is fair for your
    shareholders to shoulder that burden, as opposed to senior
    ---------------------------------------------------------------------------
    Wells Fargo management?

    A.11. The Independent Directors of the Board of Directors of
    Wells Fargo announced on September 27, 2016, that they have
    launched an independent investigation into the Company's retail
    banking sales practices and related matters, including to
    determine whether compensation claw backs are appropriate. A
    special committee of Independent Directors will lead the
    investigation, working with the board's Human Resources
    Committee and independent counsel.
        The Independent Directors have taken a number of initial
    steps they believe are appropriate to promote accountability at
    the Company. They have agreed with Mr. Stumpf that he will
    forfeit all of his outstanding unvested equity awards, valued
    at approximately $41 million. In addition, he will not receive
    a bonus for 2016. Carrie Tolstedt has left Wells Fargo, and the
    Independent Directors have determined that she will forfeit all
    of her outstanding unvested equity awards, valued at
    approximately $19 million. Ms. Tolstedt will not receive a
    bonus for 2016 and will not be paid severance or receive any
    retirement enhancements in connection with her separation from
    the Company. She has also agreed that she will not exercise her
    outstanding options during the pendency of the investigation.
    These initial actions will not preclude additional steps being
    taken with respect to Mr. Stumpf, Ms. Tolstedt, or other
    executives as a consequence of the information developed in the
    investigation.\2\
    ---------------------------------------------------------------------------
        \2\ Wells Fargo, ``Independent Directors of Wells Fargo Conducting
    Investigation of Retail Banking Sales Practices and Related Matters
    (press release)'' (Sept. 27, 2016) (available online at https://
    www.wellsfargo.com/about/press/2016/independent-directors-
    investigation_0927/).

    Q.12. In the settlement with regulators, Wells Fargo did not
    admit to any wrongdoing. Why not? Do you believe what Wells
    Fargo
    ---------------------------------------------------------------------------
    employees did was wrong?

    A.12. The particulars of the settlement were reached upon
    discussions with our regulators which are considered
    confidential supervisory information. However, Wells Fargo's
    management team did not identify or address the problems early
    enough. And there is no question that we view the actions of
    certain of our team members to be wholly unacceptable and
    wrong.
                                    ------

    RESPONSES TO WRITTEN QUESTIONS OF SENATOR MERKLEY FROM JOHN G.
                                 STUMPF

    Q.1. In the case of Gutierrez v. Wells Fargo, Judge William
    Alsup found Wells Fargo guilty of manipulating the order of its
    customers' transactions from 2004 to 2008 in order to maximize
    overdraft fees. Judge Alsup found that Wells Fargo reordered
    transactions, charging the largest transaction first rather
    than charging the transaction in chronological order. By
    reordering the transactions, Wells Fargo ensured that the
    consumer's bank account was depleted faster and the bank would
    be able to charge a higher number of overdraft fees.
        After the 2008 lawsuit, are you aware of any more instances
    and/or cases where Wells Fargo was accused of engaging in
    reordering?

    Q.2. If so, please list the instances and/or cases.

    A.1.-A.2. Many banks, including Bank of America, Capital One,
    Citibank, Citizens Bank, HSBC Bank, JPMorgan Chase Bank,
    KeyBank, TD Bank, U.S. Bank, and Union Bank have confronted
    lawsuits alleging transaction reordering. Several of the
    lawsuits filed against Wells Fargo (and Wachovia, with which it
    merged in 2008) have been dismissed, including Phillip Pena v.
    Wachovia Bank, N.A. (D.N.J., Case No. 1:08-5263); Vollmer v.
    Wachovia Bank, N.A. (N.D. Ga., Case No. 1:09-560); Poulin, et
    al. v. Wachovia Bank, N.A. (S.D. Fla., Case No. 09-cv-21863-
    JLK); Williams v. Wachovia Bank, N.A.(N.D. Cal., Case No. 3:09-
    5622); Green, Jr. v. Wachovia Bank, N.A. (N.D. Ga., Case No. 1
    10-1176); Churchwell v. Wells Fargo Bank, N.A. (S.D. Fla., Case
    No. 1:09-cv-23153); McMillan v. Wells Fargo Bank, N.A. (N.D.
    Cal., Case No. 3:08-5739); Egan v. Wells Fargo Bank, N.A. (D.
    Col., Case No. 1:09-253); Mortenson v. Wells Fargo Bank, N.A.
    (D. Nev., Case No. 3:09-65); Ray v. Wells Fargo Bank, N.A.
    (N.D. Cal., Case No. 3:09-4700); Mitchell v. Wells Fargo Bank,
    N.A. (S.D. Tex., Case No. 4:09-2578); Preston & Assoc. Int'l v.
    Wells Fargo Bank, N.A. (D. Col., Case No. 1:09-2940); Braden v.
    Wells Fargo Bank, N.A. (C.D. Cal., Case No. 2:10-3423);
    Townsend v. Wells Fargo Bank, N.A. (C.D. Cal., Case No. 2:10-
    550); and Kennedy v. Wells Fargo Bank, N.A. (N.D. Cal., Case
    No. 3:11-01222).
        The remaining cases brought against Wells Fargo and
    Wachovia have been consolidated in a multidistrict litigation
    proceeding in the United States District Court for the Southern
    District of Florida. These cases include Garcia, et al. v.
    Wachovia Bank, N.A. (S.D. Fla., Case No. 1:08-cv-22463-JLK);
    Spears-Haymond v. Wachovia Bank, N.A. (S.D. Fla., Case No.
    1:09-cv-21680-JLK); Dolores Gutierrez v. Wells Fargo Bank, N.A.
    (S.D. Fla., Case No. 1:09-cv-23685-JLK); Martinez v. Wells
    Fargo Bank, N.A. (S.D. Fla., Case No. 1:09-cv-23834); and
    Zankich v. Wells Fargo Bank, N.A. (S.D. Fla., Case No. 1:09-cv-
    23186-JLK). The consolidated cases against Wells Fargo and
    Wachovia are currently on appeal to the Eleventh Circuit.

    Q.3. Earlier this month Wells Fargo admitted to opening 2
    million unauthorized bank accounts and credit cards. Given the
    recent
    revelations of unauthorized activity committed by Wells Fargo,
    along with a history of reordering transactions, your consumers
    deserve to know if they were unknowingly opted-in to overdraft
    protection.
        During your tenure, has Wells Fargo ever enrolled customers
    in overdraft protection without their knowledge or
    authorization?

    Q.4. If yes, how many customers were opted-in to overdraft
    protection without their authorization?

    A.3.-A.4. Wells Fargo is committed to providing only those
    services that our customers need or want, including overdraft
    services. The reviews to be undertaken will examine this issue.
    Customers are encouraged to contact us if they have any issues
    or concerns.
        Please note that Wells Fargo has not ``admitted to opening
    2 million unauthorized bank accounts and credit cards.'' That
    figure
    refers to accounts that could have been [emphasis added]
    unauthorized. Please see our response to Senator Reed's
    Question 1 for additional details.
                                    ------

     RESPONSES TO WRITTEN QUESTIONS OF SENATOR SASSE FROM JOHN G.
                                 STUMPF

    Q.1.a. I'd like to discuss how this scandal impacted Nebraska.

        Of the roughly 5,300 employees who were fired, how many of
    them worked in Nebraska?

    A.1.a. Of the approximately 5,300 Wells Fargo team members
    whose employments were terminated for sales-integrity
    violations from 2011 to 2015, 47 worked in Nebraska.

    Q.1.b. During the 2011 through 2015 period covered by the
    CFPB's fine, were any Wells Fargo employees fired for failing
    to meet sales quotas? If so, how many?

    Q.1.c. Of those fired employees working in Nebraska, how many
    of them were at risk of being fired for failing to meet product
    sales quotas?

    A.1.b.-c. Wells Fargo cannot quantify with any degree of
    confidence how many team members' employments, if any, were
    terminated, solely for not meeting sales goals. The bank tracks
    involuntary terminations for failure to perform job duties,
    which can include a range of issues. It is possible that team
    members' employments were terminated solely for not meeting
    sales goals; however, Wells Fargo has safeguards in place to
    help ensure that managers remain focused on assessing team
    members' overall performance in helping customers succeed
    financially, not just whether they meet an individual sales
    goal. This includes a strong performance management program,
    which provides for coaching and feedback to help team members
    succeed, involvement of Human Resources in disciplinary
    decisions, including termination decisions, and a termination
    review process undertaken by the Employee Relations function
    that is independent of the members of business management who
    made the termination decision. Additionally, Wells Fargo has
    established a process to enable former team members who contact
    the Company today to request a review of their termination,
    even if they did not utilize the Company's termination appeal
    and review processes at the time of their departure. Former
    team members who did utilize the Company's appeal processes in
    the past will be provided with an additional review. Former
    team members who express interest in reemployment and are
    deemed to be eligible for reemployment through this review
    process will be able to work with a special recruiting team to
    assist in exploring
    opportunities at Wells Fargo. All of the team members
    referenced in Question 1(a) were terminated for sales-integrity
    violations, not for failing to meet product sales goals.

    Q.1.d. Of those fired employees working in Nebraska, please
    provide a percentage breakdown of the position held by each of
    the fired employees before they were fired.

    A.1.d. The majority held personal banker (51 percent) or teller
    (23 percent) positions at the time of termination. The other
    team members who were terminated were employed in a variety of
    Regional Bank roles, including Customer Sales & Service
    Representative, Business Banking Specialist, Assistant Store
    Manager, Service Manager, and Store Manager.

    Q.1.e. How many of those accounts classified as potentially
    fraudulent were opened in Nebraska?

    Q.1.f. How many unauthorized fees and fines were levied on
    Nebraska consumers in relation to this scandal? What is the
    total cost of these fees and fines?

    A.1.e.-f. We asked PricewaterhouseCoopers (PwC) to analyze
    approximately 82 million deposit accounts for instances of
    potential simulated funding and approximately 11 million credit
    card accounts for instances of lack of authorization. The
    accounts reviewed were opened between 2011 and 2015. Of the
    accounts reviewed, PwC found that approximately 623,000
    consumer and business credit card accounts could have been
    [emphasis added] unauthorized, and approximately 1.5 million
    deposit accounts could have [emphasis added] experienced
    simulated funding, that is, the unauthorized deposit and
    withdrawal of funds intended to create the false appearance
    that the account was being used by the customer. PwC did not
    [emphasis added] conclude that any of these accounts were
    unauthorized and/or experienced simulated funding; it just
    could not rule out these possibilities because its analysis of
    credit card authorization and potential simulated funding in
    deposit accounts was intentionally designed to be over-
    inclusive. For example, PwC flagged all credit card accounts
    that were not used and were not ``fraud activated'' by the
    customer calling an 800 number after receiving the card, unless
    there were indications of customer consent, even though there
    are many reasons why a customer may not activate their card. We
    took this intentionally expansive approach because we were
    willing to refund fees to customers who, in fact, approved
    account openings, but subsequently allowed the accounts to
    lapse, so that we did not exclude customers who may have
    suffered harm.
        We have found indications that the PwC number includes
    accounts where the customer authorized its opening. For
    example, Wells Fargo has worked to contact customers with open,
    inactive credit card accounts identified by PwC (i.e., the
    customers with
    accounts that could have been [emphasis added] unauthorized) to
    determine whether they want these credit cards. Approximately
    25 percent have informed the bank that they either did not
    apply, or did not recall whether or not they applied, for their
    card.
        Of the approximately 2.1 million accounts that PwC
    identified, PwC identified approximately 12,000 Nebraska-based
    deposit and credit card accounts in its review for which it
    could not rule out the possibility that they were unauthorized
    and /or experienced simulated funding. For the reasons
    described, it is likely that not all of these accounts had
    simulated funding and/or were
    unauthorized.
        For the approximately 2.1 million deposit and credit card
    accounts that PwC identified, Wells Fargo refunded all
    potentially unauthorized charges. PwC's review found that of
    the roughly 2.1 million accounts identified, approximately
    115,000 accounts were charged a fee, totaling $2.66 million in
    revenue to Wells Fargo. That figure, substantially all of which
    has been refunded to affected customers via check or direct
    deposit, is far surpassed by the costs associated with opening
    and closing the unused accounts.
        To Nebraska customers specifically, Wells Fargo paid
    approximately $14,000 to remediate potentially unauthorized
    charges. Again, for the reasons described, the remediation
    amount likely overstates the actual amount of unauthorized
    charges on these
    accounts.

    Q.2.a. I'd like to ask about Carrie Tolstedt's role in the
    fraudulent accounts scandal.
        When was Ms. Tolstedt first informed about Wells Fargo
    employees who were fired for creating fraudulent accounts?
    Please provide a specific date.

    A.2.a. Wells Fargo cannot determine for certain the first time
    Ms. Tolstedt was told that a team member's employment was
    terminated for committing a sales violation. Like any large
    employer, Wells Fargo constantly monitors sales-integrity
    issues so that, as issues came up that needed to be addressed,
    Ms. Tolstedt would be informed about those issues. It is our
    present understanding that these issues were likely raised with
    Ms. Tolstedt in or around 2011 but the ongoing investigation by
    the Independent Directors of the Board of Directors and others
    is looking carefully at this question.

    Q.2.b. If Ms. Tolstedt was fired for her role in the scandal,
    would she have received less total lifetime compensation (in
    any form)? If so, how much less compensation?

    Q.2.c. How much of Ms. Tolstedt's total, lifetime compensation
    (in any form), as of September 20, 2016, was eligible for
    clawback?

    Q.2.d. How much of Ms. Toldstedt's total, lifetime compensation
    (in any form) was earned from 2011 through 2016?

    Q.2.e. What legal and/or contractual standard must Wells Fargo
    evaluate in order to determinate if any of Ms. Tolstedt's
    compensation (in any form) should be clawed back?

    A.2.b.-e. Ms. Tolstedt has left Wells Fargo. She has agreed to
    not exercise any outstanding stock options previously awarded
    by Wells Fargo until the completion of the board of directors'
    investigation and that, at the conclusion of this
    investigation, the board (or the Independent Directors of the
    Board or the Human Resources
    Committee, through board delegation) will have the authority to
    determine the extent to which such options will be
    forfeited.\1\
    ---------------------------------------------------------------------------
        \1\ Wells Fargo, September 27, 2016, Form 8-K (available online at
    https://www.sec.gov/Archives/edgar/data/72971/000119312516722259/
    d266244d8k.htm).
    ---------------------------------------------------------------------------
        The board's Independent Directors have determined that all
    of Ms. Tolstedt's unvested equity compensation, valued at
    approximately $19 million, would be forfeited, and that she
    would not
    receive a bonus for 2016 or any retirement enhancements or
    severance package in connection with her separation from Wells
    Fargo. No incentive compensation was granted to Ms. Tolstedt as
    a result of her separation from the Company, and none of her
    equity awards will be ``triggered'' or otherwise increased or
    accelerated by her separation. Ms. Tolstedt could be subject to
    further compensation and other actions based upon the results
    of the Independent Directors' investigation.\2\
    ---------------------------------------------------------------------------
        \2\ Wells Fargo, ``Independent Directors of Wells Fargo Conducting
    Investigation of Retail Banking Sales Practices and Related Matters
    (press release)'' (Sept. 27, 2016) (available online at https://
    www.wellsfargo.com/about/press/2016/independent-directors-
    investigation_0927/).
    ---------------------------------------------------------------------------
        Ms. Tolstedt's total compensation from 2011 to 2015, as
    reported in accordance with SEC rules, is provided in the table
    below:\3\
    ---------------------------------------------------------------------------
        \3\ 2011-2013 compensation figures available in Wells Fargo, 2014
    Proxy Statement, at 53 (available online at https://www.sec.gov/
    Archives/edgar/data/72971/000119312514104276/d663896ddef14a.htm); 2013-
    2015 compensation figures available in Wells Fargo, 2016 Proxy
    Statement, at 3 (available online at https://www.sec.gov/Archives/
    edgar/data/72971/000119312516506771/d897049ddef14a.htm).
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Ms. Tolstedt's stock holdings and outstanding compensation
    as of September 16, 2016, fell into three categories: (a) Wells
    Fargo shares that Ms. Tolstedt owned outright and acquired
    during her 27-year career with the Company; (b) vested, but
    unexercised stock options granted in February 2008 and February
    2009; and (c) unvested and unpaid restricted share rights and
    performance share awards granted between February 2014 and
    ---------------------------------------------------------------------------
    February 2016:

      (1) LMs. Tolstedt owned 960,175 shares of Wells Fargo stock
            that were worth approximately $43.6 million based on
            Wells Fargo's September 16, 2016, closing stock price.

      (2) LMs. Tolstedt had vested, but unexercised stock options
            granted in February 2008 and February 2009 that were
            worth approximately $34.1 million pre-tax, based on
            Wells Fargo's September 16, 2016, closing stock price
            and each award's
            exercise price.

      (3) LMs. Tolstedt had unvested and unpaid equity awards in
            the form of restricted share rights and performance
            share awards, granted between February 2014 and
            February 2016, with a target value of approximately
            $18.9 million pre-tax based on Wells Fargo's September
            16, 2016, closing stock price.

        On September 27, 2016, the board announced that the
    Independent Directors had determined that Ms. Tolstedt would
    forfeit all of this last category, i.e., the outstanding
    unvested equity awards, valued at approximately $19 million.\4\
    Ms. Tolstedt also agreed that she would not exercise her
    outstanding options during the pendency of the investigation
    undertaken by the Independent Directors. These initial actions
    do not preclude additional steps being taken with respect to
    Ms. Tolstedt as a consequence of the information developed in
    the investigation.
    ---------------------------------------------------------------------------
        \4\ Wells Fargo, ``Independent Directors of Wells Fargo Conducting
    Investigation of Retail Banking Sales Practices and Related Matters
    (press release)'' (Sept. 27, 2016) (available online at https://
    www.wellsfargo.com/about/press/2016/independent-directors-
    investigation_0927/).
    ---------------------------------------------------------------------------
        For example, the board has the authority to evaluate
    previously paid incentive compensation, including prior annual
    incentive awards, under its Extended Clawback Policy. Wells
    Fargo's Extended Clawback Policy applies to any bonus payment
    (such as previously paid annual incentive awards and vested
    equity awards)
    already made to Wells Fargo's executive officers, if the bonus
    payment was based on materially inaccurate financial statements
    or any other materially inaccurate performance metric criteria.
    The board delegated to the Human Resources Committee the
    authority to make determinations with respect to the
    application of the
    Policy, including the value of the bonus payment, the amount of
    bonus payment (if any) that was based on materially inaccurate
    performance metric criteria, whether a performance metric
    criteria is material or materially inaccurate, and whether the
    inaccurate measurement of performance or application of
    performance to performance criteria is material. Under the
    Policy, the Company must exercise its rights to the fullest
    extent permitted, unless it would be unreasonable to do so.
        More generally, Wells Fargo has multiple recoupment or
    clawback policies and provisions in place that are applicable
    to current and former executive officers, including Ms.
    Tolstedt. The following table \5\ describes these policies:
    ---------------------------------------------------------------------------
        \5\ Wells Fargo, 2016 Proxy Statement, at 47-48 (available online
    at https://www.sec.gov/Archives/edgar/data/72971/000119312516506771/
    d897049ddef14a.htm).
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    ---------------------------------------------------------------------------
        \6\ Adopted June 15, 2009, and extended February 2010.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The board (or the Independent Directors or the Human
    Resources Committee, through board delegation) will assess the
    relevant facts and circumstances, the award terms, and Wells
    Fargo's recoupment and clawback policies to determine whether
    to cancel or clawback any more of Ms. Tolstedt's incentive
    ---------------------------------------------------------------------------
    compensation.

    Q.2.f. On what specific date did Ms. Toldstedt (or any other
    Wells Fargo employee) first inform you of any item relating to
    the fraudulent accounts scandal?

    A.2.f. It is our understanding that, from time to time, because
    of Mr. Stumpf's position, individuals would contact him
    directly and complain about issues and that Mr. Stumpf did
    receive complaints about sales-practice issues over the years.
    When Mr. Stumpf received such complaints, our understanding is
    that his practice was to forward them to the appropriate
    internal team, such as Human Resources, to address.
        Mr. Stumpf has said that he recalls learning of the
    increase in the number of reports of sales-practice issues in
    late 2013.
        Please note that the Independent Directors of Wells Fargo's
    Board of Directors have launched an investigation into sales-
    practice issues, and that investigation is ongoing.

    Q.3.a. It has been reported that Wells Fargo is going to end
    sales goals for its retail products by the end of the year.
        Please describe the new system that will replace these
    sales goals.

    A.3.a. While our go-forward plan is still being developed under
    the leadership of Mary Mack, the new head of our Community
    Banking Division, we contemplate using customer service,
    growth, and risk management as criteria on which we will
    evaluate our teams and individual team members, focused on
    positive customer outcomes.

    Q.3.b. Will any employee compensation be contingent on this new
    system?

    A.3.b. Regional Bank team members who serve retail customers in
    bank branches will be eligible for bonus compensation based
    upon a combination of the factors enumerated in Question 3,
    subpart (a) above.

    Q.3.c. Will employees who fail to meet the criterion under this
    new system be fired?

    A.3.c. As has always been, and will remain, the case in the
    Community Banking Division, decisions to terminate a team
    member are made on a case-by-case basis upon consideration of
    all relevant facts and circumstances.

    Q.3.d. Will product sales be considered as a part of this new
    system?

    A.3.d. No. Regional Bank team members who serve retail
    customers in bank branches will not be evaluated on product
    sales goals going forward.

    Q.3.e. What steps will Wells Fargo take to ensure that the new
    system does not incentivize the creation of fraudulent
    accounts?

    A.3.e. While our go-forward plan is still being developed, we
    are confident that our customer service, growth, and risk
    management metrics will align our team member incentives with
    our customers' interests.

    Q.4.a. I'd like to discuss the geographic distribution of the
    potentially fraudulent accounts.

        What percentage of the potentially fraudulent accounts were
    located in the city of Los Angeles? What about the percentage
    of employees fired for creating potentially fraudulent
    accounts?

    A.4.a. Approximately 9 percent of the deposit and credit card
    accounts identified by PwC were located in the city of Los
    Angeles. Please see the response to Question 1, subparts (e-f)
    above for more information about PwC's process for identifying
    these accounts.
        Of the approximately 5,300 Wells Fargo team members whose
    employments were terminated from 2011 to 2015 for sales-
    integrity violations, approximately 5 percent worked in zip
    codes located in the city of Los Angeles.

    Q.4.b. What percentage of the potentially fraudulent accounts
    were located in the Southwest Region? What about the percentage
    of employees fired for creating potentially fraudulent
    accounts?

    A.4.b. Approximately 16 percent of the deposit and credit card
    accounts identified by PwC were located in the Southwest
    region, specifically the States of Texas, Oklahoma, Arizona,
    and New Mexico. Please see the response to Question 1, subparts
    (e-f) above for more information about PwC's process for
    identifying these
    accounts.
        Of the approximately 5,300 Wells Fargo team members whose
    employments were terminated from 2011 to 2015 for sales-
    integrity violations, approximately 15 percent worked in the
    Southwest region.

    Q.4.c. What factors contributed to the geographic distribution
    of the fraud?

    A.4.c. Wells Fargo is working hard to address any Company-wide
    or region-specific processes that may have led certain team
    members to behave in a way contrary to Wells Fargo's vision,
    values, and culture. That is one reason Wells Fargo has
    eliminated product sales goals entirely for Regional Bank team
    members who serve customers in our retail branches.

    Q.4.d. Did Wells Fargo evaluate the potential for geographic
    diversity in terms of the ability to meet product sales goals?

    A.4.d. Yes. From 2011 to 2016, product sales goals varied by
    store year-to-year and across regions.

    Q.4.e. Did Wells Fargo adjust the product sales goals to match
    each region?

    A.4.e. Effective October 1, 2016, Wells Fargo no longer uses
    product sales goals for Regional Bank team members who serve
    customers in our retail branches. From 2009 to October 1, 2016,
    for the western markets and following the Wachovia/Wells Fargo
    conversion for the eastern markets, Wells Fargo centralized
    responsibility for setting store goals with its national
    leadership team working in conjunction with regional and local
    managers to determine appropriate goals for each store. A
    variety of factors were considered in determining the specific
    goals at the regional and store level, including customer
    demand and traffic, market demographics, and staffing levels.

    Q.5.a. I'd like to discuss the employees who were fired for
    creating fraudulent accounts.
        Starting in 2009, when was the first employee fired for
    creating fraudulent accounts? Please provide a specific date.

    Q.5.b. Starting in 2009, when were the first 100 employees
    fired for creating fraudulent accounts? Please provide a
    specific date.

    Q.5.c. Starting in 2009, when were the first 1,000 employees
    fired for creating fraudulent accounts? Please provide a
    specific date.

    A.5.a.-c. From 2011 to 2015, the employments of approximately
    5,300 team members were terminated for sales-integrity
    violations. Approximately 1,000 were terminated each year. For
    example, investigations by the Corporate Investigations group
    in 2013 resulted in the termination of 1,245 Community Banking
    team members. That is approximately 1 percent of Wells Fargo's
    total population of Community Banking team members.

    Q.5.d. How many employees were fired for failing to meet sales
    quotas during the 2011 through 2015 period covered by the
    CFPB's fine?

    Q.5.e. Were any of the employees who were fired for creating
    fraudulent accounts at risk of being fired for missing product
    sales goals? If so, what percentage of these employees were at
    risk?

    A.5.d.-e. Wells Fargo cannot quantify with any degree of
    confidence how many team members' employments, if any, were at
    risk of being terminated for not meeting sales goals. The bank
    tracks involuntary terminations for failure to perform job
    duties, which can include a range of issues. It is possible
    that team members' employments were terminated solely for not
    meeting sales goals; however, Wells Fargo has safeguards in
    place to help ensure that managers remain focused on assessing
    team members' overall performance in helping customers succeed
    financially, not just whether they meet an individual sales
    goal.

    Q.5.f. During the period covered by the CFPB's fine, how much
    of an employee's salary was contingent upon meeting product
    sales goals? Please provide a detailed breakdown, covering each
    category of employees who were fired for creating fraudulent
    accounts.

    A.5.f. Prior to our elimination of product sales goals,
    Regional Bank team members serving customers in our retail
    branches were eligible for earned incentive compensation based
    in part on sales performance. Leading up to the elimination of
    product sales goals, effective October 1, 2016, the actual
    incentive payouts based on sales-related performance objectives
    (distinct from service and other performance objectives)
    declined considerably: the median incentive paid as a
    percentage of total salary for sales-related objectives for
    tellers, for example, declined from 4.6 percent in 2011 to 0.9
    percent in 2015. Historically, the target incentive opportunity
    for overall performance objectives was approximately 3 percent
    of base compensation for tellers and the target for the
    majority of personal bankers was approximately 10 percent of
    base compensation. All incentive plans were capped.

    Q.5.g. What was the position of the highest ranking Wells Fargo
    employee who was fired in connection with this scandal?

    A.5.g. Of the approximately 5,300 team members whose
    employments were terminated for sales-integrity violations from
    2011 to 2015, the highest ranking Wells Fargo team member
    terminated held the position ``Regional Banking Area President
    2.''

    Q.5.h. Please provide a percentage breakdown of the position
    held by each of the fired employees before they were fired.

    A.5.h. Approximately 65 percent of the terminated team members
    were in Personal Banker positions or functionally similar roles
    and 7 percent were in Teller positions. In addition, we
    terminated the employment of over 480 team members in
    supervisory positions, including store managers and persons up
    to three levels above bankers and tellers, when investigations
    have found that those team members engaged in or directed
    improper sales practices or exhibited excessive pressure and
    did not respond promptly and decisively to change their
    behavior.

    Q.6.a. I'd like to follow up on Senator Toomey's questioning
    about Wells Fargo's SEC filings.
        Did Wells Fargo ever disclose in its SEC filings that it
    had a materially adverse set of circumstances relating to false
    accounts that could result in a large fine from multiple
    regulators? If so, when? If not, why?

    Q.6.b. If Wells Fargo did not disclose this information, would
    Wells Fargo have disclosed it if Wells Fargo had known about
    the public and market reaction to the fraudulent accounts
    scandal, along with the size and the associated fines?

    Q.6.c. If not, what are the conditions under which Wells Fargo
    would disclose in its SEC filings that it is facing a
    significant regulatory or criminal risk?

    Q.6.d. In response to the fraudulent accounts scandal, has
    Wells Fargo changed its standards and process for evaluating if
    and how to disclose potential regulatory risk in SEC filings?

    A.6.a.-d. Each quarter, we look at the relevant and appropriate
    facts available to us to determine whether a legal matter is
    material and should be disclosed in our public filings.
    Discerning materiality is not a mechanical exercise but rather
    is a determination based on judgments informed by the facts and
    circumstances known at the time the determination is made.
        Based on the facts and circumstances as we knew them at the
    time, we concluded that the sales-practices investigations by
    the Consumer Financial Protection Bureau (CFPB), the Office of
    the Comptroller of the Currency (OCC), and the Los Angeles City
    Attorney were not material. This was a considered determination
    based upon what we understood at the time these investigations
    were occurring.
        As part of our ongoing review process, we continued to
    evaluate the ongoing developments since the announcement of the
    settlements to determine whether any filings or disclosures
    should be made. In conjunction with our Form 8-K filing on
    September 28, 2016, announcing our former CEO John Stumpf's and
    our former Community Banking head Carrie Tolstedt's forfeiture
    of their unvested equity awards, we determined that it was
    appropriate to disclose the relevant legal developments that
    had occurred since the announcement of the settlements. As
    noted in our Form 8-K, these included ``formal or informal
    inquiries, investigations or examinations'' from ``[F]ederal,
    State, and local government agencies, including the United
    States Department of Justice, and State attorneys general and
    prosecutors' offices, as well as Congressional committees . . .
    ''\7\ Furthermore, our Form 10-Q filing on November 3, 2016,
    contained additional disclosures concerning sales practices
    matters, including an update to our legal actions disclosures
    and the addition of a new risk factor summarizing the legal
    developments and related events that had occurred since the
    announcement of the settlements and noting the potential that
    ``negative publicity or public opinion resulting from these
    matters may increase the risk of reputational harm to our
    business . . . ''\8\ We will continue to review developments
    related to sales practices matters and make additional
    disclosures as the facts and circumstances warrant.
    ---------------------------------------------------------------------------
        \7\ See Wells Fargo, September 28, 2016, Form 8-K (available online
    at https://www.sec.gov/Archives/edgar/data/72971/000119312516722259/
    d266244d8k.htm).
        \8\ See Wells Fargo, November 3, 2016, Form 10-Q at 67 (available
    online at https://www.sec.gov/Archives/edgar/data/72971/
    000007297116001340/wfc-9302016x10q.htm).

    Q.7.a. I'd like to discuss the compensation that Wells Fargo
    provided to its customers that were impacted by the fraudulent
    accounts scandal.
        When did Wells Fargo first learn that it had customers who
    were charged fraudulent fines and fees for fake accounts that
    were opened in their name?

    A.7.a. Because of the way that inactive accounts are
    automatically closed and the way that fees are assessed, Wells
    Fargo did not initially realize that certain customers may have
    paid fees on accounts that they did not authorize or use. In
    2015, the Company realized that, in a small percentage of
    cases, fees had been paid.

    Q.7.b. How soon after learning about these inappropriate fines
    did Wells Fargo compensate their customers for this fraud?

    A.7.b. After realizing that fees were paid in a small
    percentage of cases, PwC analyzed deposit and credit card
    accounts. PwC's analysis focused on potential simulated funding
    in deposit accounts, and the potential lack of customer
    authorization of credit card accounts. After PwC completed its
    analysis, Wells Fargo promptly made direct deposits and issued
    checks to refund substantially all fees, with interest, that
    were assessed on the approximately 2.1 million accounts
    identified by PwC.\9\ These refunds were issued without
    determining that any particular account was unauthorized.
    ---------------------------------------------------------------------------
        \9\ Refunds were not made if the amount paid by the customer plus
    interest was less than $1.00.

    Q.7.c. Does Wells Fargo plan on compensating its customers for
    all reasonable costs associated with this fraud, including any
    ---------------------------------------------------------------------------
    potential drop in their customer's credit score?

    Q.7.d. If so, how does Wells Fargo plan on identifying and
    compensating every customer who may have suffered a drop in
    credit score in association with the fraudulent accounts
    scandal?

    A.7.c.-d. Wells Fargo is working very hard to remediate harm
    that may have been caused to our customers. To that end,
    pursuant to the CFPB and OCC Consent Orders, Wells Fargo will
    retain the services of an independent consultant and develop
    redress and reimbursement plans to identify the population of
    consumers who may have been affected by improper sales
    practices. We fully expect that, once approved by our
    regulators, the redress and reimbursement plans will encompass
    various forms of harm, including harm related to credit bureau
    inquiries, and that Wells Fargo will issue and track
    reimbursement payments.
        We asked PwC to analyze approximately 82 million deposit
    accounts for instances of potential simulated funding and
    approximately 11 million credit card accounts for instances of
    lack of authorization. The accounts reviewed were opened
    between 2011 and 2015. Of the accounts reviewed, PwC found that
    approximately 623,000 consumer and business credit card
    accounts could have been [emphasis added] unauthorized, and
    approximately 1.5 million deposit accounts could have [emphasis
    added] experienced simulated funding, that is, the unauthorized
    deposit and withdrawal of funds intended to create the false
    appearance that the account was being used by the customer. In
    other words, PwC did not [emphasis added] conclude that these
    accounts were unauthorized and/or experienced simulated
    funding; it just could not rule out these possibilities because
    its analysis of credit card authorization and potential
    simulated funding in deposit accounts was intentionally
    designed to be over-inclusive. For example, PwC flagged all
    credit card accounts that were not used and were not ``fraud
    activated'' by the customer calling an 800 number after
    receiving the card, unless there were indications of customer
    consent, even though there are many reasons why a customer may
    not activate their card.
        Of the subset of accounts identified, PwC determined that
    approximately 115,000 accounts were charged a fee, averaging
    less than $25 per account and totaling $2.66 million in revenue
    to Wells Fargo. That figure is far surpassed by the costs
    associated with opening and closing the unused accounts. Wells
    Fargo has already made direct deposits and issued checks to
    refund these fees. We took this intentionally expansive
    approach because we were willing to refund fees to customers
    who, in fact, approved account openings, but subsequently
    allowed the accounts to lapse, so that we did not exclude
    customers who may have suffered harm.
        We have found indications that the PwC number includes
    accounts where the customer authorized its opening. For
    example, Wells Fargo has worked to contact customers with open,
    inactive credit card accounts identified by PwC (i.e., the
    customers with accounts that could have been [emphasis added]
    unauthorized) to determine whether they want these credit
    cards. Approximately 25 percent have informed the bank that
    they either did not apply, or did not recall whether or not
    they applied, for their card. These results demonstrate that
    PwC's findings as to credit card accounts were over-inclusive,
    containing accounts where the customer authorized the opening
    of the account.
        For those customers who want the credit card, the account
    will remain open. For any customer who does not want their
    credit card, Wells Fargo is closing the account and correcting
    credit bureau reporting. This means we are removing the account
    from the customers' credit reports going forward and
    suppressing the existence of the inquiry so that it is not
    viewable to other lenders or requestors.
        (The Fair Credit Reporting Act prohibits us removing the
    inquiry altogether and it will still be visible to customers
    pulling their own credit reports.)
        Moreover, we are in the process of determining how many
    customers obtained a credit product, with Wells Fargo or
    another company, during the time period in which their credit
    score may have been impacted by an unauthorized credit inquiry
    or existence of the trade line. While it may be difficult to
    calculate the precise impact for every customer, our intent is
    to err on the side of the customer and make them whole for
    negative repercussions that were tied to a drop in their credit
    score. This could include impacts on pricing, line or loan
    size, or credit decision. We have allocated significant
    resources to this effort and are working with the credit
    bureaus to develop a plan for submission to our regulators.
        Going forward, Wells Fargo is voluntarily expanding its
    review of accounts to include 2009 and 2010. Wells Fargo also
    provides resources to help customers request free credit
    reports and is offering a no-cost mediation option to impacted
    customers to help identify and remediate any other forms of
    harm.
        Ultimately, if any customer has any questions or concerns
    regarding his or her accounts--regardless of when those
    accounts were opened--he or she is invited to contact us so
    that Wells Fargo can address those questions or concerns.

    Q.7.e. Is Wells Fargo aware of a material amount of fraudulent
    accounts created in the names of customers prior to 2009?

    Q.7.f. What constraints would prevent Wells Fargo from
    compensating customers for losses associated with fraudulent
    accounts, from actions dating back prior to 2009?

    Q.7.g. Does Wells Fargo plan to reach back earlier than 2009 to
    refund customers for losses associated with their fraudulent
    accounts scandal? Why or why not?

    A.7.e.-g. We appreciate and share your concern that any and all
    customers who may have been impacted should be identified.
    Therefore, we are continuing to examine whether there are ways
    to identify unauthorized accounts opened prior to 2009. As an
    important initial step, we are notifying all of our consumer
    and small business Community Banking customers with a checking,
    savings, credit card, or line of credit account of this issue;
    we are also inviting and encouraging them to speak with a Wells
    Fargo representative if they have any questions or concerns
    about their accounts. Please also note that the Independent
    Directors of Wells Fargo's Board of Directors have launched an
    investigation into these issues, and that investigation is
    ongoing.
        Further, we would note again that pursuant to the CFPB and
    the OCC Consent Orders, Wells Fargo will retain the services of
    an independent consultant and develop redress and reimbursement
    plans to identify the population of consumers who may have been
    affected by improper sales practices. We fully expect that,
    once approved by our regulators, the redress and reimbursement
    plans will encompass various forms of harm, including harm
    related to credit bureau inquiries, and that Wells Fargo will
    issue and track reimbursement payments.

    Q.8.a. I'd like to discuss Wells Fargo's interactions with law
    enforcement officials and regulators.
        Please provide the specific date that Wells Fargo first
    discussed the fraudulent accounts scandal with the Consumer
    Financial Protection Bureau (CFPB).

    A.8.a. Wells Fargo's General Counsel notified the CFPB of the
    Los Angeles City Attorney's lawsuit at or about the time it was
    filed in May of 2015. The CFPB requested information shortly
    after Wells Fargo notified it of the lawsuit. In June and July
    2015, Wells Fargo provided information to the CFPB.

    Q.8.b. Does the CFPB have any employees embedded in Wells
    Fargo? If so, how many?

    A.8.b. The CFPB has 4 employees who are resident onsite. In
    addition, additional CFPB employees may be onsite at Wells
    Fargo when they are engaged in conducting examinations of our
    consumer businesses.

    Q.8.c. When (if at all) did Wells Fargo first provide the CFPB
    with internal documents relating to the fraudulent accounts
    scandal?

    A.8.c. Wells Fargo's General Counsel notified the CFPB of the
    Los Angeles City Attorney's lawsuit at or about the time it was
    filed in May of 2015. The CFPB requested information shortly
    after Wells Fargo notified it of the lawsuit. In June and July
    2015, Wells Fargo provided information to the CFPB.

    Q.8.d. Please provide the specific date that Wells Fargo first
    discussed the fraudulent accounts scandal with the Office of
    the Comptroller of the Currency (OCC).

    A.8.d. As Comptroller Curry testified before the Senate Banking
    Committee on September 20, 2016, Wells Fargo management meets
    regularly with the Office of the Comptroller of the Currency
    (OCC), our prudential regulator, about a variety of issues.
    Wells Fargo immediately cooperated with the OCC upon its first
    contact with the bank concerning these issues. Ultimately that
    involved addressing Matters Requiring Attention (MRAs) the OCC
    imposed as well as providing relevant documents in 2015.

    Q.8.e. Does the OCC have any employees embedded in Wells Fargo?
    If so, how many?

    A.8.e. Several OCC employees are embedded at Wells Fargo.

    Q.8.f. When (if at all) did Wells Fargo first provide the OCC
    with internal documents relating to the fraudulent accounts
    scandal?

    A.8.f. As Comptroller Curry testified before the Senate Banking
    Committee on September 20, 2016, Wells Fargo management meets
    regularly with the Office of the Comptroller of the Currency
    (OCC), our prudential regulator, about a variety of issues.
    Wells Fargo immediately cooperated with the OCC upon its first
    contact with the bank concerning these issues. Ultimately that
    involved addressing Matters Requiring Attention (MRAs) the OCC
    imposed as well as providing relevant documents in 2015.

    Q.8.g. Please provide the specific date that Wells Fargo first
    discussed the fraudulent accounts scandal with the Office of
    the Los Angeles City Attorney.

    A.8.g. The City Attorney filed its complaint in May 2015. Wells
    Fargo did not have substantive conversations with the City
    Attorney's office prior to that time.

    Q.8.h. When (if at all) did Wells Fargo first provide the OCC
    with internal documents relating to the fraudulent accounts
    scandal?

    A.8.h. As Comptroller Curry testified before the Senate Banking
    Committee on September 20, 2016, Wells Fargo management meets
    regularly with the Office of the Comptroller of the Currency
    (OCC), our prudential regulator, about a variety of issues.
    Wells Fargo immediately cooperated with the OCC upon its first
    contact with the bank concerning these issues. Ultimately that
    involved addressing Matters Requiring Attention (MRAs) the OCC
    imposed as well as providing relevant documents in 2015.

    Q.9.a. I'd like to discuss the fraudulent accounts that were
    created by Wells Fargo.
        What standards did the independent audit consult in
    identifying the fraudulent accounts?

    A.9.a. Please see the response to Question 7, subparts (c-d)
    above.

    Q.9.b. Could a fraudulent account had escaped notice of the
    independent audit if it had all of the characteristics of a
    fraudulent account, but it contained or was billed for more
    than $100? What about more than $1,000?

    A.9.b. PwC's analysis looked at all consumer and small business
    checking, savings, and credit card accounts opened during the
    relevant period--over 93 million accounts in total--to identify
    characteristics consistent with potential simulated funding in
    deposit
    accounts, and a potential lack of customer authorization in
    credit card accounts. Accounts were not excluded on the basis
    of how much they were charged in fees. The characteristics of
    deposits and withdrawals were factors considered by PwC in
    conducting its analysis and so the nature of the deposits made
    in an account would have affected whether the account was
    identified as possibly having simulated funding.

    Q.9.c. Of the fraudulent accounts, roughly what percentage of
    them were canceled within 3 days?

    Q.9.d. Of the fraudulent accounts, roughly what percentage of
    them were canceled within a week?

    Q.9.e. Of the fraudulent accounts, roughly what percentage of
    them were canceled after a month?

    A.9.c.-e. Deposit accounts that are not used by a customer are
    automatically closed pursuant to Wells Fargo's policies and
    procedures. Under those policies and procedures, unused
    accounts typically would not automatically be closed within a
    30-day period.

    Q.9.f. Did any of these fraudulent accounts ever contain or
    were billed for more than $1? If so, roughly, what percentage
    of
    accounts?

    Q.9.g. Did any of these fraudulent accounts ever contain or
    were any of them ever billed for more than $10? If so, roughly
    what percentage of accounts?

    Q.9.h. Did any of these fraudulent accounts ever contain or
    were billed for more than $100? If so, roughly what percentage
    of
    accounts?

    Q.9.i. Did any of these fraudulent accounts ever contain or
    were billed for more than $1,000? If so, roughly what
    percentage of
    accounts?

    Q.9.j. Did any of these fraudulent accounts ever transfer money
    to other accounts, other than those that were held by the named
    customer of the account? If so, roughly what percentage of
    accounts?

    A.9.f.-j. Please see the response to Question 7, subparts (c-d)
    above. In some instances, Wells Fargo team members temporarily
    funded unauthorized accounts with their own deposits. After a
    certain time period, those funds were removed by the team
    member.

    Q.9.k. Did Wells Fargo ever file suspicious activity reports in
    association with the accounts that were identified by the
    independent audit as potentially fraudulent? If so, how many?

    A.9.k. Wells Fargo has policies, procedures, and internal
    controls that are reasonably designed to comply with its legal
    obligations to monitor, detect, and report suspicious
    activities. Under Federal law, Suspicious Activity Reports
    (``SARs''), and any information that would reveal the existence
    of a SAR, are confidential, 31 U.S.C.  5318(g)(2)(A)(i) and 12
    C.F.R.  21.11(k).
                                    ------

     RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN FROM JOHN G.
                                 STUMPF

    Fees Charged as a Result of the Creation of Fraudulent
            Accounts
    Q.1.a. Working with PwC, Wells Fargo identified 1.5 million
    deposit accounts and 565,000 credit card accounts that ``may
    have been unauthorized.'' However, ``PwC did not find these
    accounts had been unauthorized''--it simply ``could not rule
    out the possibility.'' Please provide a detailed explanation of
    why PwC was
    unable to identify whether all of the 565,000 accounts were
    unauthorized.

    Q.1.b. What records does Wells Fargo have of the number and
    amount of fees charged on unused accounts between 2011 and
    2015?

    A.1.a.-b. We asked PricewaterhouseCoopers (PwC) to analyze
    approximately 82 million deposit accounts for instances of
    potential simulated funding and approximately 11 million credit
    card accounts for instances of lack of authorization. For
    example, PwC flagged all credit card accounts that were not
    used and were not ``fraud activated'' by the customer calling
    an 800 number after receiving the card, unless there were
    indications of customer consent, even though there are many
    reasons why a customer may not activate their card. By itself,
    the lack of activation and use by a customer does not mean that
    the customer had not authorized the card to begin with. We know
    that some customers will request a credit card for many
    reasons, including for emergencies and other reasons, but then
    they may not activate the card. However, because we could not
    confirm, based on account activity, that the customer
    authorized the account in the first place, we elected to
    consider these accounts for potential remediation. Similarly,
    for checking and savings accounts, the fact that the accounts
    have certain characteristics consistent with potential
    simulated funding does not mean that those accounts experienced
    simulated funding.
        Of the approximately 2.1 million accounts identified, PwC
    determined that approximately 115,000 accounts were charged a
    fee, averaging less than $25 per account and totaling $2.66
    million in revenue to Wells Fargo. Wells Fargo has already made
    direct deposits and issued checks to refund these fees. We took
    this intentionally expansive approach because we were willing
    to refund fees to customers who, in fact, approved account
    openings, but subsequently allowed the accounts to lapse, so
    that we did not exclude customers who may have suffered harm.
        We have found indications that the PwC number includes
    accounts where the customer authorized its opening. For
    example, Wells Fargo has worked to contact customers with open,
    inactive credit card accounts identified by PwC (i.e., the
    customers with accounts that could have been [emphasis added]
    unauthorized) to determine whether they want these credit
    cards. Approximately 25 percent have informed the bank that
    they either did not apply or did not recall whether or not they
    applied for their card. For those customers who want the credit
    card, the account will remain open. For any customer who does
    not want their credit card, Wells Fargo is closing the account
    and correcting credit bureau reporting. These results
    demonstrate that PwC's findings as to credit card accounts were
    over-inclusive, containing accounts where the customer
    authorized the opening of the account.

    Q.1.c. Please provide the annual revenue that Wells Fargo
    gained from deposit and credit card account fees for 2011-2015.

    A.1.c. The following table shows the line-item revenue data for
    Service Charges on Deposit Accounts and Card Fees as reported,
    according to generally accepted accounting principles, in Wells
    Fargo's income statements for the years 2011 through 2015.
    These figures are inclusive of both consumer and commercial
    businesses, with the commercial businesses contributing
    proportionately more in the Service Charge category than in
    Card Fees. Service Charges on Deposit Accounts are primarily
    composed of periodic account fees and overdraft fees. Card Fees
    are primarily composed of interchange fees, as well as annual
    and other fees.
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Fair Labor Standards Act (FLSA)
        For years Wells Fargo employees have described a management
    culture characterized by ``mental abuse,'' being forced to work
    overtime ``for what felt like after-school detention'' during
    the week and on weekends, and being ``severely chastised and
    embarrassed in front of 60-plus managers.''\1\ And as a June
    2016 report from the National Employment Law Project, ``Banking
    on the Hard Sell,''\2\ documents, these kinds of practices are
    pervasive across the
    industry.
    ---------------------------------------------------------------------------
        \1\ E. Scott Reckard, ``Wells Fargo's pressure-cooker sales culture
    comes at a cost,'' Los Angeles Times (December 21, 2013) (available at
    http://www.latimes.com/business/la-fi-wells-fargo-sale-pressure-
    20131222-story.html).
        \2\ Anastasia Christman, ``Banking on the Hard Sell: Low Wages and
    Aggressive Sales Metrics Put Bank Workers and Customers at Risk,''
    National Employment Law Project (June 2016) (available at http://
    www.nelp.org/content/uploads/NELP-Report-Banking-on-the-Hard-Sell.pdf).
    ---------------------------------------------------------------------------
        Even in this context, however, Wells Fargo stands out,
    given allegations that the bank repeatedly violated wage and
    hour provisions in the FLSA by denying employees overtime pay
    for hours worked in excess of 40 hours a week and by
    misclassifying workers as overtime exempt to avoid paying time
    and a half for those additional hours. My office has uncovered
    dozens of wage and hour complaints from Wells Fargo employees,
    going back as far as 1999 and cutting across many of the
    different business groups within Wells Fargo, including the
    insurance, mortgage, and retail banking groups.\3\
    ---------------------------------------------------------------------------
        \3\ See, for example, Louie Torres, ``Former employee says bank
    didn't pay overtime,'' Penn Record (August 22, 2016) (online at http://
    pennrecord.com/stories/510999469-former-employee-says-bank-didn-t-pay-
    proper-overtime); James Rufus Koren (with the Los Angeles Times),
    ``Wells Fargo still faces lawsuits from customers, ex-employees,''
    Santa Cruz Sentinel (September 10, 2016) (online at http://
    www.santacruzsentinel.com/article/NE/20160910/NEWS/160919974); Overtime
    Pay Laws Resource Center, ``$2 Million Settles Wells Fargo Overtime
    Lawsuit'' (May 12, 2015) (online at http://www.overtimepaylaws.org/2-
    million-settles-wells-fargo-overtime-lawsuit/); E. Scott Reckard,
    ``Wells Fargo's pressure-cooker sales culture comes at a cost,'' Los
    Angeles Times, (December 21, 2013) (online at http://www.latimes.com/
    business/la-fi-wells-fargo-sale-pressure-20131222-story.html); Top
    Class Actions, ``Wells Fargo Loan Officer Underpaid Overtime Class
    Action Settlement'' (October 22, 2015) (online at https://
    topclassactions.com/lawsuit-settlements/closed-settlements/210771-
    wells-fargo-loan-officer-unpaid-overtime-class-action-settlement/);
    Chicago Overtime Law Center, ``Wells Fargo Settles Overtime Class
    Action for Mortgage Consultants'' (December 29, 2015) (online at http:/
    /www.chicagoovertime
    lawyerblog.com/2015/12/1514.html); Shannon Henson, ``Tech Workers File
    FLSA Suit Against Wells Fargo,'' Law360 (May 30, 2008) (online at
    http://www.law360.com/articles/57871/tech-workers-file-flsa-suit-
    against-wells-fargo); and E. Scott Reckard, ``Wells Tellers File
    Lawsuit Alleging Unpaid Wages,'' Los Angeles Times (November 8, 2003)
    (online at http://articles.latimes.com/2003/nov/08/business/fi-wells8).
    ---------------------------------------------------------------------------
        These and other allegations raise a number of questions
    about Wells Fargo's treatment of its bank tellers and
    associates.

    Q.2.a. What are Wells Fargo's policies with regard to paying
    overtime for bank tellers and associates who stayed late or
    came in on weekends to meet their sales quotas?

    A.2.a. Wells Fargo's policy is that nonexempt team members are
    compensated for all [emphasis added] hours worked, including
    all overtime hours. Wells Fargo's Team Member Handbook states:

            If you're in a nonexempt position, you are entitled to pay for
            all hours actually worked, even those exceeding your regular
            schedule or those not authorized before working them.
            Therefore, you must report all hours worked in Time Tracker.

    Wells Fargo supports and enforces this policy and wage and hour
    compliance.
        Time Tracker is the online system that Wells Fargo
    nonexempt team members use to enter daily work time. Team
    members input, review, and approve the time reported each week.
    Time Tracker uploads the recorded work time to the payroll
    system and the team member is paid for all time worked,
    including any overtime pay. Supervisor approval of timesheets
    is not necessary for pay to be processed based upon the time
    entered by the team member.
        A team member may report any discrepancies or concerns
    regarding accurate time reporting or pay, including overtime
    pay, via an email address to the payroll team; by contacting
    the EthicsLine; or by reaching out to Human Resources (HR). The
    H.R. team investigates all such claims. If unreported time is
    identified, the team member is provided a document to record
    all previously unreported work time and pay is processed.
        Nonexempt team members are directed to an online training
    module that details how to properly record all work time in
    Time Tracker. Wells Fargo managers are required to complete
    FLSA training no less frequently than every other year. The
    training explains Wells Fargo's commitment to proper pay
    practices and emphasizes each manager's responsibilities for
    ensuring that all work time is reported and proper pay is
    received. Supplemental
    resources, including Manager Tip sheets and H.R. professionals,
    provide further support to managers to help fulfill Wells
    Fargo's
    responsibilities to comply with FLSA and fulfill all time
    keeping
    requirements.

    Q.2.b. What portion of Wells Fargo team members, sales
    associates, and bank tellers make less than the current FLSA
    salary threshold of $455 per week ($23,660 per year)?

    Q.2.c. For the group of employees that Wells Fargo paid above
    this salary threshold, how many and what percentage were
    classified as overtime exempt?

    Q.2.d. For those employees who were classified as overtime
    exempt, what percentage of their time was spent performing
    duties that were managerial in nature, as defined by the FLSA?

    Q.2.e. What was the median salary (or wage) earned by the 5,300
    bank employees that were fired for their role in the fraudulent
    activities at Wells Fargo?

    Q.2.f. What percentage of fired employees were classified as
    overtime exempt?

    A.2.b.-f. Please see the response to Question 2, subpart (a)
    above. Note that Wells Fargo has set its own minimum pay at
    $12.00/hour effective March 2016, which is higher than the
    Federal minimum wage of $7.25, and results in compensation
    higher than $455 per week for a 40-hour week. In addition, all
    salaried and hourly team members classified as regular or part-
    time (i.e., those who are regularly scheduled to work 17.5
    hours or more per week) are eligible for Wells Fargo-sponsored
    benefits, including health insurance, life insurance, dental
    and vision insurance, short- and long-term disability, 401(k)
    plan, and paid parental leave.
        At the time each new job is created, Wells Fargo completes
    an analysis of job duties to determine FLSA classification. The
    Wells Fargo Compensation Team also periodically reviews jobs or
    adjusts job classification as necessary in accordance with
    current regulations and court decisions.
        The average base compensation for team members whose
    employments were terminated ranged from approximately $26,000
    for Tellers to over $170,000 for a Regional Banking Area
    President. In general, Community Banking division team members
    earn an average total compensation of more than $50,000
    ($62,000 inclusive of benefits).
    Customer Restitution
    Q.3.a. How will Wells Fargo be providing restitution to
    customers affected by wrongdoing in these cases?

    Q.3.b. What is the criteria for determining which customers do
    or do not qualify for restitution?

    A.3.a.-b. Wells Fargo is working very hard to remediate harm
    that may have been caused to our customers. To that end,
    pursuant to the Consumer Financial Protection Bureau (CFPB) and
    Office of the Comptroller of the Currency (OCC) Consent Orders,
    Wells Fargo will retain the services of an independent
    consultant and
    develop redress and reimbursement plans to identify the
    population of consumers who may have been affected by improper
    sales
    practices. We fully expect that, once approved by our
    regulators, the redress and reimbursement plans will encompass
    various forms of harm, including harm related to credit bureau
    inquiries, and that Wells Fargo will issue and track
    reimbursement payments.
        We asked PwC to analyze approximately 82 million deposit
    accounts for instances of potential simulated funding and
    approximately 11 million credit card accounts for instances of
    lack of authorization. The accounts reviewed were opened
    between 2011 and 2015. Of the accounts reviewed, PwC found that
    approximately 623,000 consumer and business credit card
    accounts could have been [emphasis added] unauthorized, and
    approximately 1.5 million deposit accounts could have [emphasis
    added] experienced simulated funding, that is, the unauthorized
    deposit and withdrawal of funds intended to create the false
    appearance that the account was being used by the customer. In
    other words, PwC did not [emphasis added] conclude that these
    accounts were unauthorized and/or experienced simulated
    funding; it just could not rule out these possibilities because
    its analysis of credit card authorization and potential
    simulated funding in deposit accounts was intentionally
    designed to be over-inclusive. For example, PwC flagged all
    credit card accounts that were not used and were not ``fraud
    activated'' by the customer calling an 800 number after
    receiving the card, unless there were indications of customer
    consent, even though there are many reasons why a customer may
    not activate their card.
        Of the approximately 2.1 million accounts identified, PwC
    determined that approximately 115,000 accounts were charged a
    fee, averaging less than $25 per account and totaling $2.66
    million in revenue to Wells Fargo. That figure is far surpassed
    by the costs associated with opening and closing the unused
    accounts. Wells Fargo has already made direct deposits and
    issued checks to refund these fees. We took this intentionally
    expansive approach because we were willing to refund fees to
    customers who, in fact, approved account openings, but
    subsequently allowed the accounts to lapse, so that we did not
    exclude customers who may have suffered harm.
        We have found indications that the PwC number includes
    accounts where the customer authorized its opening. For
    example, Wells Fargo has worked to contact customers with open,
    inactive credit card accounts identified by PwC (i.e., the
    customers with accounts that could have been [emphasis added]
    unauthorized) to determine whether they want these credit
    cards. Approximately 25 percent have informed the bank that
    they either did not apply, or did not recall whether or not
    they applied, for their card. These results demonstrate that
    PwC's findings as to credit card accounts were over-inclusive,
    containing accounts where the customer authorized the opening
    of the account.
        For those customers who want the credit card, the account
    will remain open. For any customer who does not want his or her
    credit card, Wells Fargo is closing the account and correcting
    credit bureau reporting. This means we are removing the account
    from the customers' credit reports going forward and
    suppressing the existence of the inquiry so that it is not
    viewable to other lenders or requestors (the Fair Credit
    Reporting Act prohibits us removing the inquiry altogether and
    it will still be visible to customers pulling their own credit
    reports).
        Moreover, we are in the process of determining how many
    customers obtained a credit product, with Wells Fargo or
    another company, during the time period in which their credit
    score may have been impacted by an unauthorized credit inquiry
    or existence of the trade line. While it may be difficult to
    calculate the precise impact for every customer, our intent is
    to err on the side of the customer and make them whole for
    negative repercussions that were tied to a drop in their credit
    score. This could include impacts on pricing, line or loan
    size, or credit decision. We have allocated significant
    resources to this effort and are working with the credit
    bureaus to develop a plan for submission to our regulators.
        Going forward, Wells Fargo is voluntarily expanding its
    review of accounts to include 2009 and 2010. Wells Fargo also
    provides resources to help customers request free credit
    reports and is offering a no-cost mediation option to impacted
    customers to help identify and remediate any other forms of
    harm.
        Ultimately, if any customer has any questions or concerns
    regarding his or her accounts--regardless of when those
    accounts were opened--he or she is invited to contact us so
    that Wells Fargo can address those questions or concerns.

    Q.3.c. How many customers will be receiving restitution?

    Q.3.d. What is the total amount of restitution that these
    customers will receive?

    A.3.c.-d. The number of customers receiving restitution, and
    the amount of restitution, will continue to increase as our
    expanded review and customer outreach efforts continue and as
    Wells Fargo develops and implements a redress and reimbursement
    plan with the independent consultant required by the CFPB and
    OCC Consent Orders.
    Disclosure and Board Discussion of Problems at Wells Fargo
    Q.4. Prior to the settlement with CFPB, Wells Fargo fired over
    5,000 employees for misconduct related to false accounts. Did
    the Wells Fargo board discuss the reason for this many
    employees being fired, and the problems that led to them being
    fired? If so, please provide copies of relevant board committee
    minutes relating to this issue, including minutes of the Risk
    Committee and the Audit and Examination Committee, from October
    2013 forward.

    A.4. From at least 2011 forward, the board's Audit and
    Examination Committee received periodic reports on the
    activities of Wells Fargo's Internal Investigations group
    (which investigates issues involving team members), as well as
    information on EthicsLine and suspicious activity reporting.
    Among other things, several of those reports discussed
    increases in sales integrity issues or in notifications to law
    enforcement in part relating to the uptick in sales
    integrity issues. Some reporting discussed reasons for
    increases in sales integrity investigations and reporting,
    which included improved controls, tightening existing controls,
    and enhancements to better facilitate referrals of potential
    sales integrity violations to Internal Investigations.
        Later, the Risk Committee began to receive reports from
    management of noteworthy risk issues, which included, among
    other risks, sales conduct and practice issues affecting
    customers and management's efforts to address those risks. The
    board's Human Resources Committee also received a report from
    management that it was monitoring sales integrity in Community
    Banking. Sales integrity issues also were discussed
    periodically with the board.
        We are not presently aware of any document or instance
    prior to the settlement with the CFPB that informed the board
    of the total number of employees who had been terminated for
    misconduct related to improper sales practices. The number of
    terminations and the reasons for them are subjects that the
    Independent Directors are addressing in their investigation.
    Wells Fargo's Culture of ``Cross-Selling''
    Q.5.a. In Wells Fargo's 2010 Annual Report, you described the
    company's cross-selling success and wrote ``I'm often asked why
    we set a cross-sell goal of eight. The answer is, it rhymed
    with `great.' ''
        Was the ``cross-sell goal'' at the time eight banking
    products per household?

    A.5.b. Was this goal set at eight because ``it rhymed with
    `great'"?

    A.5.a.-b. While over 25 percent of our customers have more than
    eight products with Wells Fargo, this was an aspirational goal.
    The average U.S. household has more than 14 financial products,
    and we aspired to become our customers' primary financial
    institution by providing them just over half the number of
    products and services they need and use and by driving
    increased customer value through consolidating multiple
    financial products and services with one provider. We want to
    offer our customers valuable products and services and, to that
    end, we use our cross-sell metrics as a proxy for the depth of
    the relationships that we are building with our customers. As
    our annual reports make clear, Wells Fargo has always focused
    on the quality of our relationships with customers, not
    quantity. Providing services that the customer does not need or
    want is not in our interest or the interest of our customers.
    Clearly that happened in some cases.
    High Rates of Wells Fargo Broker Misconduct
        In April 2016, the Securities Litigation and Consulting
    Group (SLCG) used data from the Financial Industry Regulatory
    Authority's (FINRA) BrokerCheck database to assess rates of
    broker misconduct throughout the brokerage industry.\4\
    ---------------------------------------------------------------------------
        \4\ Craig McCann, Chuan Qin, and Mike Yan, ``How Widespread and
    Predictable is Stock Broker Misconduct?'' Securities Litigation and
    Consulting Group (April 2016) (online at http://www.slcg.com/pdf/
    workingpapers/McCann%20Qin%20and%20Yan%20on%20BrokerCheck.pdf). McCann,
    Qin, and Yan replicated the work of Quereshi and Sokobin, ``Do
    Investors Have Valuable Information About Brokers?'' (August 20, 2015)
    (online at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2652535)
    and Egan, Matvos, and Seru, ``The Market for Financial Adviser
    Misconduct'' (February 2016) (online at https://www.chicagobooth.edu//
    media/B76C81EFE
    39B4EDB9A4B4D8B34D0B0F7.pdf) to reconcile competing estimates of
    misconduct within the brokerage industry.
    ---------------------------------------------------------------------------
        As part of its analysis, SLCG compiled a list of brokerage
    firms that employ more than 400 brokers and ranked those firms
    based on the percentage of their brokers associated with
    ``investor harm events'' (defined, in this case, as ``the
    initial filing of a grievance [reported to FINRA] that
    subsequently results in an arbitration award in favor of the
    customer or in a settlement in excess of $10,000 prior to May
    18, 2009, and in excess of $15,000
    thereafter'').\5\ Wells Fargo Advisors was ranked 16th, solidly
    within the Top 30 recidivist firms cited by SLCG.\6\ SLCG found
    that nearly 9 percent of Wells Fargo's 1,993 brokers were
    associated with a harm event; 30 Wells Fargo brokers,
    meanwhile, had been previously fired from brokerage firms as a
    result of misconduct.\7\
    ---------------------------------------------------------------------------
        \5\ Craig McCann, Chuan Qin, and Mike Yan, pg. 6.
        \6\ Craig McCann, Chuan Qin, and Mike Yan, pg. 32.
        \7\ Craig McCann, Chuan Qin, and Mike Yan, pg. 32.
    ---------------------------------------------------------------------------
        You recently stated that ``there is no incentive [for
    employees] to do bad things'' within Wells Fargo, and that
    Wells Fargo's recent misdeeds ``in no way reflect our
    culture.''\8\ But the high rate of recidivism among Wells Fargo
    brokers raises questions about these statements. To help me
    better understand the culture of Wells Fargo Advisors, please
    provide my office with the following information and answers:
    ---------------------------------------------------------------------------
        \8\ Emily Glazer and Christina Rexrode, ``Wells Fargo CEO Defends
    Bank Culture, Lays Blame with Bad Employees,'' Wall Street Journal
    (September 13, 2016) (online at http://www.wsj.com/articles/wells-
    fargo-ceo-defends-bank-culture-lays-blame-with-bad-employees-
    1473784452).

    Q.6.a. A description of the Wells Fargo Advisors broker hiring
    process, including any policies that outline how Wells Fargo
    assesses potential hires for the likelihood of broker
    misconduct and a description of how Wells Fargo Advisors factor
    a potential hires' past misconduct into its overall decision to
    ---------------------------------------------------------------------------
    hire a candidate?

    Q.6.b. Does Wells Fargo Advisors hire brokers with records of
    misconduct, and if so, why?

    A.6.a.-b. Wells Fargo Advisors, LLC (``WFA'') subjects
    prospective financial advisors to a robust pre-hire due
    diligence process. More specifically, the Compliance Department
    performs a detailed review of the candidate's background,
    utilizing a comprehensive questionnaire, as well as by
    conducting a thorough review of the candidate's Central
    Registration Depository (``CRD'') record at FINRA. The review
    takes into consideration the candidate's complaint history,
    regulatory history, reportable financial and criminal
    incidents, past disciplinary or supervisory actions,
    registration restrictions, terminations, outside business
    activities, employment history, business mix and any other
    incidents that may be reflected on the candidate's CRD record
    or identified through independent validation. Additionally,
    each candidate is fingerprinted and undergoes a criminal
    background and financial fitness check. After a thorough and
    qualitative review of any identified issues, the Compliance
    Department will either ``object'' or ``not object'' to the
    hiring of the prospective financial advisor. In the rare
    circumstance where the line of business disagrees with the
    Compliance Department's
    recommendation, the hiring decision is escalated to senior
    representatives from Legal, Compliance, and the line of
    business for further review and a decision.

    Q.6.c. A description of how Wells Fargo Advisors compensates
    its brokers.

    A.6.c. Please see response to question 6, subpart (f), below.

    Q.6.d. How does Wells Fargo Advisors ensure that its brokers,
    once hired, do not engage in misconduct? Please provide copies
    of any training materials, policies, or procedures the company
    uses.

    A.6.d. WFA has established and maintains an extensive
    supervisory and oversight program, which includes multiple,
    complementary processes to review the conduct of its Financial
    Advisors for potential and actual breaches of WFA's policies
    and procedures and/or applicable rules, regulations, and
    standards of practice. WFA utilizes this supervisory and
    oversight control system to identify potential and/or actual
    misconduct; of course, WFA also may learn of misconduct through
    customer complaints and/or the Wells Fargo corporate
    EthicsLine. Although not an exhaustive list, some of the more
    pertinent controls, systems, processes, or functions within WFA
    that may lead to the discovery of misconduct include:

       LField Supervision: As an integral part of WFA's
            ``first line of defense,'' Branch Office Managers and
            local, qualified supervisors perform direct supervision
            of Financial Advisors and other branch team members by
            enforcing WFA's policies and procedures.

       LCentralized Supervision Units (CSUs): Like WFA's
            field supervisors, the CSUs sit within the line of
            business organizationally, and are delegated the
            responsibility to review trade blotters, and daily and
            monthly alerts generated by WFA's electronic
            SuperVision system. SuperVision is a suitability-based
            supervisory system that assists WFA's supervisory
            personnel in identifying accounts and transactions that
            may
            warrant further attention, based on the triggering of
            established risk-based thresholds. The CSUs also
            coordinate the
            review of electronic communications for assigned
            branches,
            review annuity transactions, perform targeted account,
            product and Financial Advisor activity reviews, and
            perform self-audits, among other risk-related
            activities.

       LRetail Surveillance & Oversight: The Retail
            Surveillance & Oversight Group within the Compliance
            Department consists of several distinct teams that
            conduct retail brokerage transaction oversight through
            both systematic and targeted monitoring. The group
            monitors activities to mitigate risk using various
            internal control tools, including the SuperVision,
            Smartstation, and Compliance Reporting applications.
            The group conducts oversight of the CSUs and other
            Qualified Supervisors to assess supervisory practices
            and to identify and address potential compliance and
            sales practice issues. The Retail Control Group within
            Compliance maintains WFA's
            restricted lists and monitors retail trading for
            compliance with trade restrictions. The Market Reviews
            Group performs targeted reviews of existing products
            and established supervisory programs within the
            business channels to assess their
            effectiveness.

       LBranch Examinations: The WFA Branch Examinations
            Team is responsible for conducting onsite announced and
            unannounced compliance examinations of the retail
            brokerage lines of business in order to test compliance
            with Federal, State, and SRO regulations and Firm
            policies and procedures. As with the other WFA
            Compliance units, the primary purpose of Branch
            Examinations is to provide oversight of branch-related
            activities within WFA in order to identify and mitigate
            potential risks. All WFA-registered branch sales
            locations are visited within the calendar year. The
            exam program is risk-based, with a strong focus on
            brokerage sales practices, product suitability, and
            supervision. The program is tailored for the specific
            sales practices engaged in by each retail brokerage
            unit. When applicable, current Securities and Exchange
            Commission and FINRA regulatory priorities are
            incorporated into the program. The exam program is
            reviewed and updated annually for each business unit
            with the advice and feedback of the Compliance
            Department, Legal, and senior supervisory staff.
            Summaries of frequent branch exam findings and trends
            are continually shared and discussed with business unit
            senior management throughout the exam cycle.

       LSpecial Supervision and Review (SSR): The SSR Group
            conducts investigations related to potential violations
            of Firm policies and industry rules; recommends and
            tracks discipline; reviews requests by registered
            representatives to participate in certain Firm
            programs, and manages the Firm's Heightened Supervision
            Program. The SSR Group coordinates the application of
            WFA's disciplinary review standards with members of
            Internal Investigations, External Fraud, Human
            Resources, Employee Relations, Legal, and line-of-
            business management.

       LTrading Review Group: The WFA Trading Review Group
            is responsible for performing daily reviews of team
            member and client trading activity with a view toward
            identifying potential instances of insider trading. The
            Team analyzes trade data, market data, news events, and
            information provided by others including from various
            business supervisors or other Compliance personnel. The
            Trading Review Team serves as the primary escalation
            point for potential insider trading occurrences, and
            has the responsibility for determining whether
            additional escalation is warranted. Business and
            control function units that may refer matters to the
            group include: Corporate AML, the field supervisors and
            the CSUs described above, Legal, and other Compliance
            team members. Matters involving team members, or
            accounts within their control, are referred to the SSR
            group (described above) for further investigation.

       LComplaints Resolution Group: WFA's Complaints
            Resolution Group within the Compliance Department
            gathers,
            reports, responds, tracks, and analyzes sales practice
            and operational customer complaints, in keeping with
            Finra's requirements and expectations. The group
            routinely refers and
            collaborates with business and control function units
            regarding possible violations of Firm policy, standards
            of care, and
            industry rules and regulations.

       LInternal Controls: The Internal Controls Group
            within the Compliance Department is responsible for
            monitoring WFA's overall control environment and for
            implementing programs designed to improve the control
            environment. The group works with managers across all
            business units to review internal controls, help
            mitigate regulatory and operational risk, and to
            assist in maintaining high corporate governance
            standards. The Internal Controls Group performs
            independent testing throughout the year in support of
            WFA's 3130 program.

       LInternal Audit: Commonly referred to as the ``Third
            Line of Defense,'' internal audit is another critically
            important control function, which also reviews for
            policy breaches and
            misconduct.

       LEthicsLine/Employee Escalation: All team members
            have the ability to raise concerns 24-hours a day, 7-
            days a week, anonymously via telephone or online
            through the Company's EthicsLine.

    Q.6.e. A description of the disciplinary process that Wells
    Fargo Advisors initiates, should it find any of its brokers
    guilty of
    misconduct.

    A.6.e. Depending on the nature and severity of the misconduct,
    there are a number of ways in which misconduct can be addressed
    by WFA. As a general matter, all compliance policy breaches may
    be subject to WFA's established disciplinary review process,
    which is designed to provide a swift and meaningful response
    and to promote consistency in determining appropriate levels of
    discipline across WFA (and its different sales channels). The
    SSR Group investigates matters relating to violations of Firm
    policies (including the Wells Fargo Code of Ethics and Business
    Conduct) and industry rules, and typically coordinates with
    management within the line of business, and, as needed, with
    Internal Investigations, Legal, Risk, Human Resources, Employee
    Relations, among other groups to ensure that all disciplinary
    decisions and recommendations are thoroughly and fairly vetted.
    WFA may impose internal discipline ranging in severity from a
    Memorandum of Education all the way to involuntary termination.
    Policy violations that are not compliance-oriented are
    generally handled pursuant to corporate Human Resources
    Corrective Action Guidelines. Such corrective
    actions could include a Performance Improvement Plan, Informal
    Warning, Formal Warning, or Final Notice.

    Q.6.f. Are there compensation policies or other business
    practices that Wells Fargo has changed because of concerns that
    they could contribute to or encourage broker misconduct?

    A.6.f. WFA's compensation plans are designed to be balanced,
    fair, and appropriately controlled, with a focus on product-
    neutral incentive design and deferral compensation. WFA has
    also developed a comprehensive process for the periodic review
    and approval of changes to such plans. WFA's CEO, the Head of
    Wealth Management (for Wealth Brokerage Services, or ``WBS'')
    and WFA's
    Conflicts Committee all participate in the review of field-
    facing compensation plans. WFA's Conflicts Committee is
    comprised of senior leaders from the various control functions
    and lines of business, including Compliance, Legal, Risk, Human
    Resources,
    Finance, Products & Advice, and the sales channels. The Chief
    Compliance Officer, Chief Risk Officer, Head of HR, and the
    senior-most WFA Legal representative each possess full ``veto''
    authority on this Committee, which provides an opportunity for
    important control function representatives to help shape the
    design of any compensation plans.
        Each compensation plan includes components to mitigate risk
    and incent compliance with industry rules, regulations, and
    standards of practice. For example, WFA incentive compensation
    plans include the following characteristics:

       LRequirements to comply with all industry laws,
            rules, and regulations, and procedures applicable to
            the Participant's assigned job responsibilities;

       LPerformance-based deferrals, with specific goals,
            such as best practices activities that move toward
            long-term client-focused solutions; and

       LFull discretionary authority for the Plan
            Administrator to adjust or amend a Participant's
            deferred compensation incentive award under the Plan,
            subject to the approval of the Line of Business Head.
            This component provides the Line of Business with the
            authority to modify awards due to unknown or unforeseen
            circumstances that may arise.

        Generally, branch manager compensation plans include
    several risk mitigation components, including:

       LAll operational losses and settlements are charged
            directly to the profit/loss (P&L) of the branch, with
            the branch P&L being considered in bonus awards;

       LAnnual branch inspections are performed on Markets
            and Complexes by the Branch Examinations team in
            Compliance (described above). Inspection failures
            result in a direct reduction to the branch manager's
            annual performance award;

       LDiscretionary awards recognize and reward
            leadership in numerous areas, including risk and
            culture in the manager's branch; and

       LBranch manager salary is designed to compensate
            individuals for their role as manager, which includes
            financial performance, supervision, compliance, risk
            management, and other
            factors.

        As referenced above, WFA conducts regular reviews of
    compensation plans for field-facing team members, with a view
    toward incenting client-focused behaviors and outcomes.
    Wells Fargo Campus Card Program
    Q.7.a. According to a 2012 report by U.S. PIRG, Wells Fargo had
    contracts with institutions of higher education serving over 2
    million students to provide student identifications that can be
    linked to a Wells Fargo checking account.\9\ In some cases,
    these contracts provide Wells Fargo exclusive access to market
    to students.
    ---------------------------------------------------------------------------
        \9\ U.S. PIRG, The Campus Debit Card Trap: Are Bank Partnerships
    Fair to Students? (May 30, 2012) (online at http://www.uspirg.org/
    reports/usp/campus-debit-card-trap).
    ---------------------------------------------------------------------------
        In 2009, Congress enacted the Credit CARD Act, which banned
    aggressive marketing practices on college campuses. Banks are
    now forbidden from providing gifts to lure students into
    signing up for credit cards. They are also required to publicly
    disclose contracts. However, these requirements do not apply to
    student checking
    accounts.

    Q.7.a.i. Have any Wells Fargo staff or service providers
    offered any gift of value to students as an inducement to
    activate a Wells Fargo checking account?

    A.7.a.i. The Wells Fargo Campus Card Program's policy has been
    to offer gifts of only token value to students who open Wells
    Fargo checking accounts. Such gifts typically have a value of
    less than $5.

    Q.7.a.ii. Has Wells Fargo established any sales targets to
    employees regarding enrollment in student checking accounts?

    A.7.a.ii. The Wells Fargo Campus Card Program did not establish
    any student checking account sales targets.

    Q.7.a.iii. How many accounts have been opened by students
    enrolled in institutions with contracts with Wells Fargo, by
    year from 2007 to the present?

    A.7.a.iii. Wells Fargo does not have a means to track accounts
    opened by students attending higher education institutions that
    have Campus Card contracts with Wells Fargo.

       LStudents may open accounts in any of our branches
            from coast-to-coast, and may or may not notify a banker
            of their status as a student or the school that they
            attend.

       LStudents may choose to open any of a number of
            Wells Fargo accounts and services that best meet their
            needs, further limiting Wells Fargo's opportunity to
            draw any conclusions about accounts held by students
            based solely on product type/name.

       LStudents may open their accounts long before
            enrolling in or attending a school with which Wells
            Fargo has a Campus Card contract, and the students may
            choose to participate in the Campus Card Program with
            their pre-existing accounts.

       LStudents may transfer into/out of institutions or
            graduate from institutions without notifying Wells
            Fargo.

       LInstitutions' faculty and staff may participate in
            Campus Card Programs, and may choose the same accounts
            that many students choose.

    Q.7.b. According to a study by the Consumer Financial
    Protection Bureau, nearly 40 percent of individuals aged 18-25
    incurred an overdraft, with 11 percent incurring more than 10
    overdrafts on an annualized basis, making these young
    consumers, often college students, a lucrative segment for big
    banks.\10\ What is the total amount of overdraft fees incurred
    by Wells Fargo student accounts, by year and by campus from
    2007 to the present? By campus?
    ---------------------------------------------------------------------------
        \10\ Consumer Financial Protection Bureau, Data Point: Checking
    Account Overdraft (July 2014) (online at http://
    files.consumerfinance.gov/f/201407_cfpb_report_data-
    point_overdrafts.pdf).

    A.7.b. Wells Fargo does not have a means to track accounts
    opened by students attending higher education institutions that
    ---------------------------------------------------------------------------
    have Campus Card contracts with Wells Fargo.

       LStudents may open accounts in any of our branches
            from coast-to-coast, and may or may not notify a banker
            of their status as a student or the school that they
            attend.

       LStudents may choose to open any of a number of
            Wells Fargo accounts and services that best meet their
            needs, further
            limiting Wells Fargo's opportunity to draw any
            conclusions about accounts held by students based
            solely on product type/name.

       LStudents may open their accounts long before
            enrolling in or attending a school with which Wells
            Fargo has a Campus Card contract, and the students may
            choose to participate in the Campus Card Program with
            their pre-existing accounts.

       LStudents may transfer into/out of institutions or
            graduate from institutions without notifying Wells
            Fargo.

       LInstitutions' faculty and staff may participate in
            Campus Card Programs, and may choose the same accounts
            that many students choose.

    Q.7.c. In 2013, the Consumer Financial Protection Bureau called
    on financial institutions to publicly disclose their secret
    contracts with colleges. Has Wells Fargo made these agreements
    available to students and their families on an easily
    accessible website? If so, where? If not, why not?

    Q.7.c.i. Please provide all contracts with institutions of
    higher education to market accounts to students from 2007 to
    the present,
    including those agreements no longer in existence.

    Q.7.c.-c.i. Campus banking agreements are subject to Department
    of Education rules requiring certain higher education
    institutions to make these agreements available to students and
    their families on easily accessible websites. Due to
    confidentiality provisions contained in some contracts with
    higher education institutions, Wells Fargo cannot release that
    information; only the educational institutions can.
    Alternatively, the Department of Education has published a
    database of such contracts, as self-reported by higher
    education institutions. That database is available at this
    website: https://studentaid.ed.gov/sa/about/data-center/school/
    cash-management-contracts.

    Q.7.d. In the hearing, I raised concerns regarding cross-
    selling practices at Wells Fargo. These concerns are comparable
    to cross-selling issues that have been raised regarding the
    Wells Fargo Campus Card Program.

    Q.7.d.i. Please provide all documentation regarding what
    policies and procedures are in place regarding cross-selling
    other products to Wells Fargo private student loan borrowers.

    Q.7.d.ii. How many private student loan customers have signed
    up for other accounts at Wells Fargo since 2009?

    Q.7.d.iii. For these accounts, what has been the total amount
    of fees related to other accounts charged to students who had
    Wells Fargo student loans?

    Q.7.d.iv. What incentives were provided to Wells Fargo sales
    and marketing staff to cross-sell student loan borrowers into
    other Wells Fargo products? Please provide total amount of
    additional compensation paid to employees for cross-selling
    student loan
    borrowers.

    A.7.d.i.-iv. For the period from January 1, 2009, through
    September 30, 2016, there were 570,510 customers that were
    first-time recipients of private student loans. Before opening
    their first student loan account, such customers had previously
    opened on
    average approximately 1.6 bank products with Wells Fargo. Such
    private student loan customers as of September 30, 2016, had on
    average approximately 1.8 active bank products with Wells
    Fargo.
        From January 2014 to September 2016, Loan Origination team
    members for the Education Financial Services (``EFS'') line of
    business would refer student loan customers (students and co-
    signers) to a banker if the customer expressed an interest in
    other banking products and services. EFS Loan Origination team
    members were eligible for closed referral payouts for every
    qualified closed referral--$5 per closed referral in January
    2014 and $10 per closed referral from February 2014 through
    September 2016--with a maximum monthly payout for all closed
    referrals of $150 in January 2014 and $140 from February 2014
    through September 2016.
        The total amount of banker referrals paid to EFS Loan
    Origination team members for closed/qualifying referrals from
    January 2014 through September 2016 was $95,135.

    Q.7.e. The Wells Fargo student loan program offers different
    loan terms and interest rates for students at traditional
    colleges and universities (Wells Fargo Collegiate) than it does
    for students enrolled at career and community colleges, which
    have much higher interest rates. Please provide a detailed
    description of how the bank is pricing private student loans
    for students, including an explanation for why the bank charges
    career and community colleges higher interest rates.

    Q.7.e.i. How many borrowers--by school--are in each of these
    student loan programs?

    Q.7.e.ii. Please provide the aggregate demographic information
    of borrowers in each of these student loan programs, by school.

    Q.7.e.iii. Please provide the average interest rate for
    borrowers in each of these student loan programs by FICO band.

    A.7.e.i.-e.iii. Wells Fargo is proud to partner with students
    at thousands of institutions across the country. A customer
    receives an interest rate that corresponds with a variety of
    applicant-specific factors, institutional loss/delinquency rate
    data, and competitive market considerations.
        The table below includes balance and rate information for
    Wells Fargo's active loan programs:
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Wells Fargo Student Loan Business Segment
    Q.8.a. On August 22, 2016, Wells Fargo's student loan
    business--one of the biggest in the country--was fined by the
    Consumer
    Financial Protection Bureau for illegal student loan servicing
    practices. According to the consent order, Wells Fargo
    illegally hit
    borrowers with multiple late fees and engaged in wrongful
    conduct related to credit reporting.\11\ The Consumer Financial
    Protection
    Bureau warned about these practices in a detailed report in
    October 2013, noting that ``too many borrowers have to run
    through an
    obstacle course to get their payments processed properly.''\12\
    ---------------------------------------------------------------------------
        \11\ Consumer Financial Protection Bureau, ``CFPB Takes Action
    Against Wells Fargo for Illegal Student Loan Servicing'' (August 22,
    2016) (online at http://www.consumerfinance.gov/about-us/newsroom/cfpb-
    takes-action-against-wells-fargo-illegal-student-loan-servicing-
    practices/).
        \12\ Consumer Financial Protection Bureau, ``CFPB Report Highlights
    Private Student Loan Payment Processing Pitfalls'' (October 16, 2013)
    (online at http://www.consumerfinance.gov/about-us/newsroom/cfpb-
    report-highlights-private-student-loan-payment-processing-pitfalls/).

    Q.8.a.i. What was the total annual compensation for the
    officers of Wells Fargo Education Services' top 5 executives,
    including its head, John Rasmussen, from 2010 to the present?
    Please specify compensation by component (base salary, cash
    awards, equity awards, other deferred compensation, and other
    ---------------------------------------------------------------------------
    perquisites).

    Q.8.a.ii. What remedial and corrective actions did the board of

    directors take to executives and employees engaged in the
    illegal student loan servicing conduct uncovered by the
    Consumer Financial Protection Bureau? How many executives and
    employees were sanctioned or terminated (please provide names
    and sanctions)?

    Q.8.a.iii. Were any executives required to return any bonuses
    or cash awards? Please provide all meeting minutes of the board
    of directors and the management team related to these
    discussions.

    A.8.a.i.-a.iii. The August 20, 2016, Consent Order issued by
    the Consumer Financial Protection Bureau covered certain legacy
    student loan servicing practices concerning (i) how payments
    were
    allocated across multiple loans (payment allocation), (ii) how
    partial payments were aggregated, and (iii) a systems
    programming error related to the assessment of late fees. The
    Consent Order requires a total amount of $410,000 of customer
    remediation for late fees assessed under the following
    scenarios:

       LPayment allocation: Wells Fargo allocated payments
            sent in for less than the full amount due to pay a
            group of loans in a single account and in a manner the
            CFPB found as not for the greatest benefit of the
            customer. Wells Fargo amended its allocation practices
            in August 2012. Late fees will be
            refunded to customers.

       LPayment aggregation: Wells Fargo did not aggregate
            some partial payments or overpayments paid within the
            same month or over multiple months when they
            collectively added up to a monthly payment. Wells Fargo
            automated the aggregation process in 2011 and
            eliminated the issue. Late fees will be
            refunded to customers. Additionally, we will make the
            appropriate credit bureau reporting adjustments.

       LLate fees on payments made during the grace period:
            Wells Fargo identified a system coding error that
            resulted in a failure to waive late fees for some
            payments made on the last day of the payment grace
            period (i.e., payments that constituted a full monthly
            payment). The system coding error was corrected in May
            2013, and self-identified to the CFPB. Late fees will
            be refunded to customers.

        The matters covered by the Consent Order were operational
    issues and a systems coding error. As the issues came to our
    attention, we took action to resolve them, in each case well
    before the CFPB issued its Consent Order. The Consent Order
    does not require any changes to Wells Fargo's current student
    loan servicing methodologies related to payment allocation and
    payment aggregation, or its approach to processing payments
    made during the grace period. Wells Fargo is enhancing billing
    statements, repayment schedules and borrower--facing Web pages
    to provide customers additional detail concerning its payment
    application and allocation methodologies, including with
    respect to partial payments.

    Q.8.b. In 2012, the Consumer Financial Protection Bureau
    released a report detailing the deeply troubling practices by
    the private student loan industry, including aggressive direct
    marketing and subprime-style lending to students, many of whom
    took out high-cost loans before accessing Federal student aid.
    Many of these loans were not certified by the student's
    institutions of higher
    education.

    Q.8.b.i. How many loans did Wells Fargo (or its acquired
    subsidiaries) make to private student loan borrowers that were
    not
    certified by the student's institution of higher education?

    A.8.b.i. Wells Fargo is proud to partner with hundreds of
    thousands of students across the country and offer them
    valuable products they need, including educational loans. Since
    May of 2012, 100 percent of Wells Fargo's core undergraduate
    and graduate loans have required the school's certification as
    a condition of loan
    approval and funding. Wells Fargo continues to provide access
    to needed credit for student customers seeking to refinance/
    consolidate existing private student loans, to pay for bar exam
    study, to cover medical residency, or for similar purposes
    where a school certification is not applicable (e.g., for
    customers that have graduated from school and are seeking to
    refinance existing private loans, the student is no longer
    enrolled). These specialty loan programs constitute less than
    25 percent of Wells Fargo's annual private student loan
    business and less than 3 percent when excluding consolidation/
    refinancing of existing student loan debt.

    Q.8.b.ii. What referral fees or bonuses did Wells Fargo pay to
    lenders and marketers who steered business to--or sold private
    student loans to--the bank?

    A.8.b.ii. The sole private loan lead-referral arrangement with
    another organization is terminating at the end of November
    2016. The terms of this contract are protected against
    disclosure by confidentiality provisions.

    Q.8.b.iii. What incentives were provided to Wells Fargo sales
    and marketing staff to drive student loan volume? Please
    provide documentation on these incentive agreements from 2003-
    2015.

    A.8.b.iii. For Wells Fargo's education loan division, overall
    compensation for team members is based on a blend of salary and
    variable compensation plans. Variable compensation plans are
    based on a balance of product acquisition goals, customer
    satisfaction goals, and compliance and quality goals.

    Q.8.c. The Consumer Financial Protection Bureau has called on
    the private student loan industry to aggressively offer
    borrowers loan modifications to reduce their principal and help
    struggling borrowers get back on track.

    Q.8.c.i. How many private student loans has Wells Fargo
    provided principal reduction?

    Q.8.c.ii. What is the total amount of principal forgiveness
    that has been provided?

    Q.8.c.iii. What are the detailed criteria for loan
    modifications with principal reduction?

    A.8.c.i.-iii. Wells Fargo's reliance on prudent underwriting
    requirements, designed to ensure that credit extensions are
    only made when supported by an ability to repay, facilitates
    access to credit within safety and soundness expectations of
    our prudential regulators. Our long-standing commitment to
    responsible underwriting has for many years translated into
    uninterrupted access to credit in support of access to higher
    education with very strong repayment performance within our
    overall private education loan
    portfolio.
        Today, over 97 percent of our private education loan
    accounts that are in repayment are current, and our private
    education loan portfolio has reflected comparable delinquency
    management results for a number of years. Our servicing program
    also provides important tools and features to assist the very
    small percentage of
    customers who experience repayment difficulty, such as an
    extensive loan modification program, a long-standing loan
    refinancing option, and loan forgiveness in the event of the
    death or permanent/total disability of the student loan
    beneficiary.
    Long-Term Repayment Options: Loan Modifications
        For the small number of Wells Fargo private student loan
    customers experiencing serious financial hardship and who need
    assistance beyond short-term payment assistance options, Wells
    Fargo developed and introduced its Private Student Loan
    Modification Program in November 2014. The Wells Fargo student
    loan modification program provides financially distressed
    customers a modified, affordable monthly payment by reducing
    the private
    student loan interest rate to as low as 1 percent, and, only if
    ``affordability'' is not reached through interest rate
    reductions, by extending the loan term up to an additional 5
    years. The reduced interest rate approach means that more of
    each payment that is made is applied toward the principal of
    the loan, more quickly reducing the debt load of the customer
    while providing a payment he or she can afford given her or his
    current situation. Loan modifications can cover from 1 to 5
    years, depending on the individual circumstances of each
    customer. In accordance with safety and soundness guidance,
    Wells Fargo's student loan modification program does not
    include principal forgiveness as part of the solution for the
    customer because principal forgiveness for unsecured debts
    constitutes a settlement and therefore requires an accelerated
    payback of the remaining balance within a short term, negating
    the benefit of any initial payment reduction.
    Details:
       LAffordability is defined as reaching a prescribed
            payment-to-
            income (PTI) ratio based upon the total of our Wells
            Fargo private student loan payments as a percentage of
            the borrower's and/or cosigner's gross income. All
            liable parties on the loan(s) must be demonstrating a
            hardship for the loan to qualify for a modification.
            Liable parties must provide income documentation to
            verify their level of income prior to approval.

       LInitial temporary modification periods cover 12 to
            60 months depending upon the borrower's circumstances.
            After this initial period, the interest rate will begin
            to increase in steps every 6 months until a pre-
            determined final market-level interest rate is reached.

       LA permanent modification, where the interest rate
            and payment will never increase, may be offered in
            cases where there is no expectation for increased
            future income.

       LLoans may be current or delinquent to be eligible;
            however, if they are less than 60 days past due, the
            parties will need to meet the ``Imminent Default''
            criteria to qualify. Examples of Imminent Default
            criteria are: 10 percent or greater reduction in income
            since time of origination, unexpected ongoing increases
            in household expenses >10 percent of income (not
            including debt payments), temporary disability, etc.

    See the answer to Question 8, subpart (c)(iv) below for more
    detail.

    Q.8.c.iv. Are loan modifications available to borrowers who are
    not yet in distress? If so, please provide the criteria for
    providing loan modifications.

    A.8.c.iv. Customers seeking relief through our student loan
    modification program do not need to be delinquent to obtain
    payment relief. The borrowers and any cosigners present on the
    loan(s) in question, however, do need to be showing some level
    of distress. To be considered for a loan modification, the
    hardship the customer is experiencing must be 6 months or
    greater in duration. If it is less than that we have other
    short-term options to help them stay current on their loans.
    The criteria for determining a hardship are as follows:

       LLoan(s) 60 days past due or greater qualify as
            being in a hardship.

       LFor loans less than 60 days past due, a hardship
            must meet one of the following Imminent Default
            criteria:

         LThe combination of the change in income and
            change in Education Financial Services (``EFS'')
            private student loan
            payment must exceed a specified percentage of current
            income.

           LPayment change would not include a private
            student loan account(s) coming out of a deferment.

           LIf origination income for the liable parties is
            not available, then we will use the income from the
            prior 2 years to
            determine if any changes have occurred.

           LFor student borrowers who are in their first 2
            years of
            repayment, prior income is not considered in the
            Imminent Default calculation as their income was not
            used for purposes of obtaining the loan.

         LA documented, involuntary, unplanned increase in
            monthly living expense (this does not include debt
            obligation).

         LCapacity to repay the current loan terms must be
            in question based on one or both of the following:

           LExceeding a debt-to-income ratio threshold.

           LGross residual income is less than the
            threshold.

           LDeath of immediate family member, documented
            by:

             LDeath certificate, or

             LObituary or newspaper article reporting the
            death; and

             LIncome documentation prior to the event
            compared to income documentation of the remaining
            borrower after the event.

         LLong-term or permanent disability or illness of
            the borrower or cosigner or dependent family member (in
            accordance with the IRS's definition of dependent),
            documented by:

           LMedical bills, or

           LProof of monthly insurance benefits or
            government assistance (if applicable), or

           LTax return showing medical deductions above the
            minimum for itemized deductions.

            LNote: If the ``disability'' is a total and permanent
            disability of the borrower that qualifies the loan for
            forgiveness under EFS's Death and Disability
            Forgiveness Policy, the loan will be processed in
            accordance with such Policy rather than considered
            under this Policy for a loan modification. Since 2010,
            Wells Fargo has forgiven over $47 million in private
            student loans due to the death or permanent/total
            disability of the student borrower/beneficiary. This
            loan forgiveness feature is part of the consumer credit
            agreement that we enter into with our customers,
            affording our customers a contractual right to this
            benefit. We also provide information about the
            availability of such loan forgiveness on our public
            website (for example, please see https://
            www.wellsfargo.com/student/repay/).

         LLegally documented divorce or separation,
            documented by:

           LDivorce decree signed by the court, or

           LCurrent credit report evidencing recorded
            divorce decree, or

           LSeparation agreement signed by the court if
            separation is legally documented by the court, or

           LCurrent credit report evidencing recorded
            separation agreement; and

           LIncome or expense documentation prior to the
            event compared to the income or expense documentation
            of the
            remaining borrower after the event.

       LOnce a hardship is established either through the
            delinquency level or the Imminent Default criteria, we
            attempt to reach affordability for our customers by
            targeting payment-to-income ratio thresholds as a
            percentage of gross income dependent upon the level of
            income.

    Q.8.d. Until it sold much of its portfolio to Navient, another
    student loan giant, Wells Fargo owned billions of dollars in
    Government-guaranteed student loans and was one of the largest
    participants in the Federal Family Education Loan Program
    (FFELP).
        Borrowers with FFELP loans are eligible for income-driven
    repayment loan modification plans to help them lower their
    monthly payments if they are struggling to repay their loans.
    Wells Fargo, in its role as a student loan servicer, was
    responsible for enrolling borrowers in these programs so they
    could avoid default.

    Q.8.d.i. How many borrowers on Wells Fargo's FFELP portfolio
    have enrolled in income-driven repayment plans since 2009?
    Please specify enrollment by number of borrowers, number of
    loans, and total dollar amount by year, from 2009.

    Q.8.d.ii. How many borrowers have defaulted on Wells Fargo's
    FFELP portfolio? Please specify defaults by number of
    borrowers, number of loans, and total dollar amount by year,
    from 2009?

    Q.8.d.iii. Were any Wells Fargo executives or board provided
    executive performance bonuses conditioned on meeting certain
    income-driven repayment loan modification plan targets? If so,
    what?

    A.8.d.i.-iii. After the sale of substantially all of its legacy
    Federal loan portfolios in 2014 and 2015, Wells Fargo has a
    very small remaining FFELP loan portfolio, which materially
    impacts the loan-default figures and enrollment figures in
    2015/2016 compared to the figures for 2012, 2013, and 2014.
        The table below contains information about Federal loan
    customers enrolled in income-based or income-sensitive
    repayment plans for calendar years 2012 through 2015. The data
    has two limitations: (1) a customer is only counted once even
    if she enrolled in income-based or income-sensitive repayment
    plans more than once in any particular year, and (2) a customer
    can be counted in more than 1 year if she was enrolled in
    income-based or income-sensitive repayment plans in multiple
    years.
    Enrollment in income-based or income-sensitive repayment plans
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The table below contains Federal loan default data for
    calendar years 2012 through 2015. The data has two limitations.
    First, the data captures the number and amount of loan(s) paid-
    off through the guaranty agency claim payment process, as of
    the date of claim payment, where the claim submission was based
    on ``default'' of the borrower. Second, the data does not
    include loans that may have defaulted but were not eligible for
    a claim payment because the loan lost the Federal guaranty due
    to an origination or servicing defect.
    Federal loan-default data
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The nonmanagement members of the board of directors do not
    receive bonuses.

                  Additional Material Supplied for the Record
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]