[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
  
  
  
  
  
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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 *
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     * 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.
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                           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.
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    \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).
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    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).
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    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.
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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).
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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.
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    \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).
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---------------------------------------------------------------------------
    \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.
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                                ------                                


 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.
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---------------------------------------------------------------------------
    \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]


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

              Additional Material Supplied for the Record
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