[Senate Hearing 115-128]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 115-128


                      WELLS FARGO: ONE YEAR LATER

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

                                HEARING

                               before the

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

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                                   ON

  EXAMINING WELLS FARGO BANK'S CULTURE, ORGANIZATIONAL STRUCTURE, AND 
  MANAGEMENT'S MONITORING AND RESPONSIVENESS, AS WELL AS THE REFORMS 
       INSTITUTED BY THE COMPANY IN MAKING CUSTOMERS WHOLE AGAIN

                               __________

                            OCTOBER 3, 2017

                               __________

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



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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      MIKE CRAPO, Idaho, Chairman

RICHARD C. SHELBY, Alabama           SHERROD BROWN, Ohio
BOB CORKER, Tennessee                JACK REED, Rhode Island
PATRICK J. TOOMEY, Pennsylvania      ROBERT MENENDEZ, New Jersey
DEAN HELLER, Nevada                  JON TESTER, Montana
TIM SCOTT, South Carolina            MARK R. WARNER, Virginia
BEN SASSE, Nebraska                  ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas                 HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota            JOE DONNELLY, Indiana
DAVID PERDUE, Georgia                BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina          CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana              CATHERINE CORTEZ MASTO, Nevada

                     Gregg Richard, Staff Director

                 Mark Powden, Democratic Staff Director

                      Elad Roisman, Chief Counsel

                      Joe Carapiet, Senior Counsel

                Brandon Beall, Professional Staff Member

                 Elisha Tuku, Democratic Chief Counsel

            Laura Swanson, Democratic Deputy Staff Director

           Corey Frayer, Democratic Professional Staff Member

                       Dawn Ratliff, Chief Clerk

                      Cameron Ricker, Deputy Clerk

                     James Guiliano, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)






























                            C O N T E N T S

                              ----------                              

                        TUESDAY, OCTOBER 3, 2017

                                                                   Page

Opening statement of Chairman Crapo..............................     1

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

                                WITNESS

Timothy J. Sloan, Chief Executive Officer and President, Wells 
  Fargo & Company................................................     4
    Prepared statement...........................................    40
    Responses to written questions of the Senate Banking 
      Committee..................................................    43

              Additional Material Supplied for the Record

Letter submitted by Americans for Financial Reform and Public 
  Citizen........................................................   124
Economic Policy Institute report.................................   128
Letter submitted by Economic Policy Institute Policy Center......   130
Wells Fargo Financial Overview report............................   133

                                 (iii)

 
                      WELLS FARGO: ONE YEAR LATER

                              ----------                              


                        TUESDAY, OCTOBER 3, 2017

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:01 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Mike Crapo, Chairman of the 
Committee, presiding.

            OPENING STATEMENT OF CHAIRMAN MIKE CRAPO

    Chairman Crapo. This hearing will come to order.
    Before we begin today, let me acknowledge that our Nation 
is still mourning and remembering the lives lost in Las Vegas. 
Our condolences go out to the families affected by this heinous 
crime, and our thanks go to the courageous first responders and 
police and citizens who put their lives on the line to save 
others.
    Two Members of this Committee, both of the Senators of 
Nevada, are absent today because they are in Nevada, and I know 
that Senator Heller and Senator Cortez Masto are currently 
doing all they can there. And we will remain united in prayer 
and support with them during this difficult time.
    Today we are going to hear testimony from Wells Fargo chief 
executive officer and president Tim Sloan. Welcome, Mr. Sloan.
    Mr. Sloan. Thank you.
    Chairman Crapo. Just over a year ago, former Wells Fargo 
chairman and chief executive officer John Stumpf testified in 
front of this Committee on the bank's fake-account scandal and 
his handling of its fallout.
    Of the many issues emphasized by the Committee Members 
during that hearing, one was the need to hold executives 
accountable and to ensure that customers impacted would be made 
whole.
    Mr. Stumpf repeatedly committed that the bank would take 
necessary actions to make it right and to restore the public's 
and the investors' trust in the company.
    Incidents like these remind us of how critically important 
it is for companies to institute policies and procedures that 
foster customer protection, promptly identify and address 
problems, and treat customers fairly.
    Since that hearing, Wells Fargo has made changes to its 
corporate and managerial structure in an effort to address the 
concerns raised by this incident. However, new developments and 
disclosures at the bank during the last year merit new 
scrutiny.
    On August 31, 2017, Wells Fargo announced the results of an 
expanded review of retail banking accounts, which included 
accounts opened between January 2009 and September 2016. The 
expanded review found the number of potentially unauthorized 
accounts was 3.5 million instead of 2.1 million.
    Separately, the company discovered problems with respect to 
its auto Collateral Protection Insurance, or CPI, program and 
self-reported these issues to its regulators.
    In response to complaints, Wells Fargo reviewed policies 
purchased on behalf of customers between 2012 and 2017 and 
found that up to 800,000 customers may have been harmed by 
Wells Fargo's CPI practices. The end result was that customers 
were charged for car insurance that they did not need, and some 
had their vehicles wrongfully repossessed. For families, having 
your car repossessed or credit compromised is devastating.
    These new developments raise a number of questions that 
Wells Fargo must answer, including:
    What has Wells Fargo done to ensure that customers affected 
by any of these issues are or will be made whole?
    In more complex cases where customers' credit scores were 
negatively affected, how is Wells Fargo working with other 
parties to restore those credit scores and return amounts in 
those instances where customers experienced higher borrowing 
costs?
    What structural and cultural changes has Wells Fargo made 
in the last year to address both past issues and new 
revelations? And what evidence is there that new policies and 
procedures are effective?
    And, finally, as Members asked last year, what has been the 
involvement of regulators since the initial incident and in 
response to the new disclosures?
    We welcome your comments on these matters, Mr. Sloan. And 
before we get to the testimony, Senator Brown.

           OPENING STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Mr. Chairman. I would echo your 
comments about the citizens of Las Vegas and those many 
visitors that also lost their lives or were injured in that 
terrible shooting. Our hearts go out to all of them and their 
families. Special concern also to Senators Heller and Cortez 
Masto on this Committee. After every tragedy we always say our 
hearts and minds go out to those victims and their families. I 
hope that the U.S. Senate will actually do something about this 
for a change.
    A year ago, then-Wells Fargo CEO John Stumpf sat in this 
hearing room attempting to explain the inexplicable. The bank's 
punitive sales goals had pressured its employees into opening 
over 2 million fraudulent checking and credit card accounts.
    In written follow-up questions for the record, Committee 
Democrats asked Mr. Stumpf if he was confident that this type 
of fraudulent activity existed in no other part of Wells Fargo. 
We asked about a variety of products, including insurance.
    On November 15, 2016, Wells Fargo responded, ``We believe 
that the activity at issue here was limited to certain team 
members within the Community Banking Division.''
    We have learned over the past year that the problems at 
Wells are much larger and more systemic than the bank 
originally disclosed.
    Before being forced to come clean by a multi-agency 
investigation, Wells Fargo went to great lengths to bury--to 
bury--this scandal. It subjected customers to forced 
arbitration, preventing them from their day in court, further 
concealing the fraud. Let me give examples. Employees who tried 
to alert senior management to the treatment of Wells Fargo 
customers were silenced or fired.
    In 2013, a California customer sued, claiming Wells had 
opened several unauthorized accounts in his name. Wells Fargo 
forced--forced--that case out of the courts and into nonpublic 
arbitration, claiming that the terms of a real account should 
govern the fake ones.
    Think about that. Using forced arbitration, Wells forced 
that case out of the courts and into nonpublic arbitration 
claiming that the terms of a real account should govern the 
fake ones.
    In 2015, another customer in California filed a class 
action against Wells for the same practices, and the bank again 
used its fine-print legalese to fight to keep the case under 
seal--again, using forced arbitration.
    Has the company changed? Just 2 months ago, Wells used its 
forced arbitration clause again to argue that it should not 
have to pay customers it cheated on overdraft fees.
    In August of this year, Wells finally disclosed that the 
number of fraudulent accounts was at least 3.5 million--70 
percent higher than it originally reported. The bank also 
revealed that it had stuck 800,000 customers with auto 
insurance policies, as Chairman Crapo said, without telling 
them or checking to see if they already had insurance.
    The bank was aware of these problems in its auto loan 
division in July 2016. Yet Wells' CEO told this Committee that 
fraudulent sales practices were limited to the Community Bank.
    Mind you, this was not a casual response to a question that 
caught somebody off guard in a hearing. It was a written 
response that was undoubtedly approved by lawyers and others at 
the bank. Maybe even you, Mr. Sloan, were among those who saw 
the response before it was sent to Congress.
    A week after last year's hearing, the Board of Directors 
initiated its independent review of the company's sales 
practices. The report to the board, whose members, I might add, 
are paid an average of $370,000 for a part-time job--$370,000 
to prepare for and attend several meetings a year, found that 
the fault lay elsewhere.
    That is cold comfort to the thousands of employees--who 
make perhaps one-tenth of what these board members make--who 
were fired for failing to generate enough new accounts.
    The board chose to limit the scope of the review to the 
Community Bank, which is troubling. It should have known, or 
should have wanted to know, that additional problems existed in 
other divisions.
    The changes that Mr. Sloan and his team have made are not 
sufficient to reform a corporate culture that is willing to 
abuse its customers and its employees in an effort to pad its 
numbers and in an effort to increase executive compensation.
    In light of the millions of Americans defrauded by Wells 
Fargo, the recent Equifax breach that compromised 145 million--
the number seems to be growing--145 million Americans' personal 
financial information, and the SEC breach that led to insider 
trading, it is no wonder the public does not trust our 
financial system.
    We need strong rules to guard against abuses in forced 
arbitration, in payday lending, in debt collection, in mortgage 
servicing, and credit reporting accuracy.
    Rather than working to roll back consumer protections, as 
this Committee seems to want to do, we should be supporting the 
Consumer Financial Protection Bureau. We should be supporting 
other financial watchdogs that stand up for hardworking 
Americans when big companies take advantage of them.
    Thank you Mr. Chairman.
    Chairman Crapo. Thank you, Senator Brown.
    We will now proceed to testimony from Mr. Tim Sloan, the 
chief executive officer and president of Wells Fargo & Company. 
Mr. Sloan, your written statement will be made a part of the 
record in its entirety, and you may proceed with your oral 
remarks.

  STATEMENT OF TIMOTHY J. SLOAN, CHIEF EXECUTIVE OFFICER AND 
                PRESIDENT, WELLS FARGO & COMPANY

    Mr. Sloan. Chairman Crapo, Ranking Member Brown, and 
Members of the Committee, my name is Tim Sloan, and I am the 
CEO of Wells Fargo. I want to thank you for the invitation to 
this hearing on ``Wells Fargo: One Year Later''.
    This was a year of disappointment and transition at Wells 
Fargo. When my predecessor testified here last year, we had not 
fully grappled with the damage the sales practices scandal had 
done to our customers, our team members, and their trust in our 
bank. We recognized too late the full scope and seriousness of 
the problems in our Community Bank. We did not come to Congress 
with a good plan, and we deserved your criticism.
    But I heard you, and I heard our customers and our team 
members. I heard them loud and clear. You expect us to do 
better, and so do we.
    So let me be very clear: I am deeply sorry for letting down 
our customers and our team members. I apologize for the damage 
done to all the people who work and bank at this important 
American institution. When the challenges at Wells Fargo 
demanded decisive action, we acted too slowly and too 
incrementally. That was unacceptable.
    I also want to be clear about another thing: Wells Fargo is 
a better bank today than it was a year ago. And next year, 
Wells Fargo will be a better bank than it is today. That is 
because we have spent the past year determined to earn back the 
public's trust.
    Since I became CEO 11 months ago, my team and I have been 
focused on three tasks we are here to discuss today.
    First, in response to the sales practices problems 
announced in 2016, we are transforming our Community Bank. Our 
retail bank has a strong new leader. Oversight, compliance, and 
human resources are much more effective than a year ago and 
have far greater visibility and accountability across the 
entire company. We have revamped the incentives for our retail 
team members by eliminating product sales goals. Today Wells 
Fargo rewards teamwork and excellent customer service, not just 
selling products. Our Community Bank is a fundamentally 
different organization from the one that existed in 2016.
    Second, we are reviewing operations and increasing 
accountability across the entire company. Now when a concern 
emerges, we identify it quickly, we escalate it promptly, we 
disclose it appropriately, and we address it fully. We will 
demand individual executive accountability. We have clawed back 
$180 million in senior executive compensation, and we have 
fired senior retail, mortgage, and auto lending executives for 
not performing up to the standards our customers deserve.
    Third, we are compensating every customer who has suffered 
because Wells Fargo made mistakes. Last year, we reviewed 93 
million accounts opened between 2011 and 2015. This year, we 
went back and took an even closer look at 165 million accounts 
opened between 2009 and 2016. Just as we expected, we found 
more accounts that should not have been opened. This was not 
new potential misconduct since last year. It all happened 
before 2017. But it is a very serious issue all the same, and 
we are completely committed to fixing it.
    Of the 3.5 million potentially unauthorized accounts, about 
190,000 incurred $6 million in fees and charges. Wells Fargo is 
refunding every nickel, and we are paying $142 million to 
compensate all affected customers, including for increased 
borrowing costs from credit score impacts.
    Apart from these formal reimbursement mechanisms, I want to 
be very clear that Wells Fargo is committed to addressing any 
concern that any of our customers may have about an unwanted 
product or service, no matter where or when it may have 
occurred. If there is a problem, we want to hear about it.
    This past year has been humbling and challenging. My number 
one job as CEO is to make sure that nothing like this happens 
again at Wells Fargo. Fortunately, joining me in this big task 
are 270,000 outstanding Wells Fargo team members. I am proud of 
their hard work and want to thank them for their commitment to 
making things right.
    I see improvement every day, and so do our team members. I 
think our customers have noticed the improvement, too. I pledge 
to you that we will not stop until we restore our customers' 
trust and make Wells Fargo the finest and most ethical company 
it can be.
    Thank you again for the opportunity to address the 
Committee. I look forward to your questions.
    Chairman Crapo. Thank you, Mr. Sloan.
    In our hearing last year, Members of this Committee asked 
many questions about how customers and consumers whose credit 
scores were impacted would be made whole. In cases where 
customers' credit scores were negatively affected, how is Wells 
Fargo working with other parties to restore those credit scores 
and, in cases where customers experienced higher borrowing 
costs, reimbursing those costs?
    Mr. Sloan. Chairman Crapo, we are doing that in a few ways. 
First and foremost, we went to the credit bureaus and provided 
the names of our customers whose accounts could have been 
inappropriately opened. Unfortunately, because of regulation, 
the credit bureaus could not provide us with the detail of 
those customers back to us.
    What we saw when we looked at that is about 40 percent of 
those customers had no use of the trade lines within a year, so 
their credit was not impacted. Of that remaining 60 percent, 
about 25 percent had no impact on their credit scores. We found 
that the median impact--or, excuse me, the mean impact was 
about 4 points. But numbers are just numbers because certainly 
more customers were impacted, and some could have been impacted 
in credit scores by more than 4 points.
    So then what we did is we reached out to 43.5 million small 
businesses and consumers and said, ``If you have an issue, come 
into Wells Fargo and see us, and we will make it right.'' 
Approximately 41,000 customers have come in. Based upon that, 
about half had credit-related issues, and we have made it right 
for those customers.
    In addition, as part of the $142 million settlement that I 
mentioned, the lion's share of those funds are going to go to 
customers whose credit scores have been impacted. So we are 
going to be working with the experts that the attorneys for the 
class have provided. We are going to provide them with whatever 
information they want. We are reaching out to those 43 million 
customers again, as well as tens of millions of former 
customers, to make sure that they know about the class action 
settlement so that they can be made whole as part of that 
settlement for any credit impacts.
    Chairman Crapo. Thank you. And some of the actions required 
by regulators as a part of your September 2016 settlements 
include the establishment of a compliance committee carrying 
out an enterprise-wide risk review of sales practice risk and 
maintaining enterprise-wide sales practice risk management and 
oversight.
    What has been the involvement of regulators since the 
initial incident, including in response to the new disclosures 
about the increased amount of unauthorized accounts as well as 
the CPI issues?
    Mr. Sloan. Sure. We have an active dialogue with our 
regulators--the Federal Reserve, the OCC, and the CFPB--when we 
are talking about bank-related issues. So there is a tremendous 
amount of dialogue. For example, as it relates to the 
Collateral Protection, or CPI, issue, when that got escalated 
in the third quarter, we reported it to our regulators on a 
real-time basis, and we have been working with them not only to 
keep them apprised of those issues, but also in particular with 
the OCC, working with them to make sure that the remediation 
plan we had for any customer that was impacted by CPI is 
acceptable.
    As it relates to the fundamental changes that I have made 
since I became CEO to our compliance, we have done the 
following things:
    First and foremost, we have centralized all of our 
enterprise risk control activities. That was one of the 
failings that the report from the independent board of 
directors found, and we agree with that. So those have been 
centralized.
    We are hiring a new compliance officer. We have completed 
and devised a new compliance plan. We have created a Conduct 
Office in the Centralized Risk Group that independently brings 
up complaints, ethics line issues, any sort of team member 
turnover, so that we can connect the dots better than we did a 
year ago.
    Chairman Crapo. Thank you very much.
    Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    I do not think we have a good answer yet, Mr. Sloan, as to 
how and why this activity went on for so long in your bank. The 
company first blamed rogue employees who were trying to meet 
unrealistic sales goals; then blamed Carrie Tolstedt, the 
senior executive vice president for community banking, who 
earned $9 million in 2015; then finally, John Stumpf, the 
chairman and CEO, who earned $19 million that year.
    You have been at Wells Fargo for a long time, 30 years. You 
have been COO, CFO, chief administrative officer, head of the 
Wholesale Bank, which includes overseeing insurance. Was there 
no point, Mr. Sloan, prior to 2015 with the lawsuits and the 
terminations and the whistleblowers, was there no point that 
you saw a problem in the bank that required action?
    Mr. Sloan. Senator, that is incorrect. In fact, I have been 
very public and have made this statement on a number of 
occasions, and also it was a finding of the board's report that 
in 2013, when the sales practices issues were elevated to the 
Operating Committee, I sat on that Operating Committee, you are 
absolutely correct, in my role at that time as CFO, that it was 
elevated to that group. We took action, but in hindsight, 
Senator, we took action that was insufficient, as I said in my 
opening statement. And I am angry about how we handled the 
problems historically. I am disappointed in how we have done--
how we handled those. But the fundamental changes that I have 
made since I have been CEO are addressing the failings that the 
board report pointed out, our regulators pointed out, and the 
mistakes that I saw in my prior roles.
    Senator Brown. All right. That is an answer, but as the 
CFO, as a long-time employee of that company, as having a 
strong, I understand, close relationship with Mr. Stumpf, it 
still perplexes me why your anger now or speaking out about it 
4 years ago could not have had more impact, but let me turn to 
another issue.
    You have testified about how Wells has changed, but I think 
actions speak louder than words. For years, your bank used 
forced arbitration to hide cases where customers alleged fake 
accounts had been opened in their names. I mentioned in my 
opening statement the 2013 lawsuit, the 2015 lawsuit that Wells 
was able to squelch because of the forced arbitration clause. 
Not only did you use forced arbitration to keep the fraud 
hidden--that is what it did--but your bank has also taken the 
position that the fine print on a real account should apply to 
a fraudulent one. Though you have settled with some customers 
on that issue, your bank was still making that argument as 
recently as last month against customers in Utah.
    To top it off, in August you asked a court to toss out a 
class action on a completely different scandal that also goes 
back several years, again, based on the forced arbitration 
clauses, the arbitration clause you force your customers to 
sign.
    Many of your competitors are starting to eliminate or have 
eliminated the practice, have stopped the practice of forced 
arbitration. Would you commit to the Committee today that Wells 
Fargo will quit using forced arbitration?
    Mr. Sloan. No, I will not, Senator. When I hear the word 
``arbitration,'' what I hear is the word ``failing.'' And when 
we have to resort and have to have a conversation with our 
customers about arbitration, it means that we do not have the 
right product; we have not provided it in the right way; we 
have not responded to their complaint; and we have not made it 
right to them. So let me describe what we have done to change 
that.
    First and foremost, we are doing a thorough review of all 
of our products and services to make sure that they are the 
right products and services for our customers. In some 
situations we have stopped providing certain products because 
we did not believe that we could provide them in the 
appropriate way.
    Second, we are improving how we train our people and our 
team members to sell our products, to provide the right advice, 
to provide the right service.
    Third, when a customer comes in, we are trying to resolve 
the complaint completely. One important change that we have 
made in our Community Bank--and in my opening statement I 
mentioned we have made fundamental changes in our Community 
Bank--now when you come into one of our branches, one of our 
bankers or tellers does not say, ``I cannot handle your 
problem. Call this 800 number.'' We settle it right then and 
there.
    In addition to that, fourthly, as part of resolving the 
sales practices issues, we have expanded to a nationwide 
mediation. So we pay for a mediator to work with on behalf of 
our customers--it is an independent mediator, to work on behalf 
of our customers to resolve complaints. I am happy to say that 
of the 43.5 million customers that we reached out to in the 
fourth quarter, those ones that came back----
    Senator Brown. I am going to cut you off. I apologize, 
because I wanted to follow up on that, and I appreciate the 
long, detailed answer, and I think it was made in good faith. 
But I also think that forced arbitration clauses always give 
the advantage to the employer, to the bank, as we know. We know 
that. That is established fact. You are still going to use 
those forced arbitration clauses to take advantage of your 
customers the way you did with the suits in 2013 and 2015 and 
the case against the customers in Utah.
    Why should we believe you are committed to changing your 
bank's practices and being fair to customers when you continue 
to use that behind-closed-doors arbitration system that clearly 
does not allow customers their day in court?
    Mr. Sloan. Senator, the reason is because I think we have 
made fundamental changes to the way that we do business so it 
will limit the number of times that that ever becomes an issue.
    Senator Brown. To limit the number of times is good. I 
appreciate that. But give them their day in court, those that 
you are not able to help or that you are not able to satisfy.
    Mr. Sloan. Senator, I look at the CFPB's own study, and the 
CFPB's own study said that arbitration is fast and efficient 
for consumers. And the CFPB's own study said that consumers 
have better returns, higher resolutions with institutions----
    Senator Brown. That is a selective reading of the CFPB's 
study, but keep in mind where the CFPB ultimately came out on 
that question.
    Thank you, Mr. Chairman.
    Chairman Crapo. Senator Kennedy.
    Senator Kennedy. Thank you, Mr. Chairman. Good morning, Mr. 
Sloan.
    Mr. Sloan. Good morning, Senator.
    Senator Kennedy. Thank you for being here.
    Mr. Sloan. Thank you.
    Senator Kennedy. Like you, I believe in the free enterprise 
system. I think the free enterprise system has lifted more 
people out of poverty than all the social programs put 
together. I am certainly not anti-business. Quite the contrary. 
We all on this panel talk about the importance of jobs. I do 
not see how you can be for jobs if you are against business.
    But what I am curious about is what in God's name were you 
thinking? I am not against large. I am happy when businesses 
are successful. I am not against big. With all due respect, I 
am against dumb. I am against a business practice which has 
Wells Fargo first and customers second. I think it ought to be 
customer first and Wells Fargo second. I think it is better for 
the customer and better long term for Wells Fargo.
    When did this start?
    Mr. Sloan. Senator, I completely agree with you. Wells 
Fargo cannot be a successful American institution, we cannot 
employ 270,000 of what I think are the best team members, 
unless we put our customers first. And there is no question 
that in our Community Bank we had an incentive plan that put 
selling products first as opposed to customers first.
    Senator Kennedy. Nothing wrong with that if it is good for 
the customer. But when did it start? When did it all start? You 
have investigated back to 2009, I believe?
    Mr. Sloan. Senator, no, the board of directors, the 
independent board of directors, members of the board looked 
back as far as 2002, and that is where they found--and I agree 
with them--that they saw instances of inappropriate sales 
activity under that plan.
    Senator, we should have ended that plan years ago. We made 
a mistake. There is no question about that. We have ended that 
plan. We have rolled out a new incentive plan, to your point, 
in our Community Bank. That incentive plan rewards good 
customer service. It rewards providing products in the right 
way.
    Senator Kennedy. Mr. Sloan, I appreciate that, and I am 
really not trying to be rude. We just have a 5-minute limit, 
and our Chairman enforces it pretty strictly, as he should.
    Can you tell me this: what is the total number right now of 
fake accounts you found?
    Mr. Sloan. Senator, in our review going back nearly 8 years 
to 2009, we found that--because we could not call 165 million 
people. What we did is we used a very conservative set of data 
metrics to look at, and it was done by an independent party, 
not by----
    Senator Kennedy. And what did you come up with in terms of 
the number?
    Mr. Sloan. There were up to potentially--3.5 million 
potentially unauthorized accounts.
    Senator Kennedy. And that is back to 2009?
    Mr. Sloan. That is correct.
    Senator Kennedy. Did you go back further than that?
    Mr. Sloan. Senator, we could not go back much further than 
that, and the reason we picked 2009, that is when Wells Fargo 
and Wachovia came together. So as we went back further than 
that, the data starts to deteriorate.
    Senator Kennedy. How much money did you make off of those 
3.5 million fake accounts?
    Mr. Sloan. Well, again, Senator, they were potentially 
unauthorized. There were some legitimate accounts in that 
number. But let us assume that they were all inappropriate.
    Senator Kennedy. Yes.
    Mr. Sloan. We found 190,000 accounts that we charged fees, 
and that was approximately $6 million in total, and we have 
refunded that.
    Senator Kennedy. OK. Was anybody's credit impacted?
    Mr. Sloan. Not for those deposit accounts, but for the 
potentially unauthorized credit card accounts, their credit 
could have been impacted. And we are in the process of working 
to correct that.
    Senator Kennedy. And you said you talked to the credit 
bureaus. Are they being cooperative?
    Mr. Sloan. Yes, they are.
    Senator Kennedy. You said they were not giving you certain 
information?
    Mr. Sloan. Well, when we provide them information about 
customers, they cannot provide us the detailed credit history 
without the customer's approval. So what they did is they gave 
us data without the customer name so we could determine----
    Senator Kennedy. I thought you could buy it from them?
    Mr. Sloan. Pardon me?
    Senator Kennedy. I thought you could buy----
    Mr. Sloan. We cannot buy it from them, but we--and that is 
why it is very important and an important part of the $142 
million settlement that--and that is really the linchpin of 
that entire settlement, is to make it right for their credit 
histories. And so that is how they are going to be able to get 
their credit histories fixed.
    In addition, if they come in to see us, of course, we will 
go ahead and do that.
    Senator Kennedy. Sure. Thank you, Mr. Sloan.
    Mr. Sloan. Thank you.
    Senator Kennedy. Thank you, Mr. Chairman.
    Chairman Crapo. Thank you.
    Senator Tester.
    Senator Tester. Thank you, Mr. Chairman. And thank you for 
being here today, Mr. Sloan.
    Let me just go through what we have learned over the last 
year. In September of 2016, we learned that 2.1 million Wells 
Fargo accounts had been fraudulently set up, credit, checking, 
debit, unauthorized setting up.
    July of 2017, we learned that Wells Fargo set up 800,000 
auto insurance policies who did not want or did not need them.
    And then in August of 2017, we learned an additional 1.8 
million--that is over and above the 2.1 million--1.4 million 
accounts were set up for unknowing customers.
    If you add all those up, that brings the accounts to 4.3 
million people either fraudulent accounts or insurance 
companies, if my math is correct.
    Mr. Sloan. That is correct.
    Senator Tester. 4.3 million people, by the way, is over 4 
times the population of the State of Montana. It is a pretty 
good-size chunk of folks.
    The Chairman and Ranking Member of this Committee in their 
opening statements basically asked you: What have you done that 
you can tell us today that has changed this culture? This is 
not one person. This is not tellers on the ground. This has 
been a culture. So what can you tell me concisely that you have 
done--and I know you have talked about, you know, transforming 
your community banks. But what as CEO have you done, or the 
board or whatever, to ensure to us that we are not going to be 
back here next week or a month from now or a year from now 
talking about something else?
    Mr. Sloan. Senator, I cannot promise you perfection, but I 
can promise you that we are working as hard as we can to get to 
near perfection, and that is, we are reviewing processes and 
procedures, turning over every stone.
    First and foremost, what we had to do and what you 
criticized us for last year--and you were absolutely right--is 
we had to have an executive team that took full responsibility 
for that. That was number one.
    Number two, we needed to reinforce that with our team, so 
we went out and we talked to our team, and we asked them what 
they were concerned about. They were concerned about things 
like pay. They were concerned about things like escalation of 
issues. They were concerned about things like executive 
accountability. They were concerned about things like revamping 
our equity lines and things like that--our ethics lines, excuse 
me.
    The point is we have listened to our team, and as you are 
listening to the team, that fundamentally changes the culture.
    Senator Tester. OK.
    Mr. Sloan. And, Senator, the proof of the pudding there is 
that our turnover is now down to its lowest level in 4\1/2\ 
years; and, in particular, it is down to its lowest level in 
our Community Bank where we had our biggest issues.
    Senator Tester. OK. So just to let you know, I hope this 
all works, because I think it is absolutely essential that it 
works. If we are doing this again 6 months from now, it is not 
going to be good.
    You talked about the things you have done, reviewing the 
customers and products, improving training, resolving problems. 
You talked about a nationwide mediator. Who pays for the 
nationwide mediator?
    Mr. Sloan. We do.
    Senator Tester. Who chooses them?
    Mr. Sloan. The customer does. We just go to an independent 
mediation service, and the customer can do----
    Senator Tester. The customer is the one who makes the call 
to the mediator?
    Mr. Sloan. Yeah. I mean, we provide them with a list of 
names. They can decide who they want to use, and we will pay 
for it.
    Senator Tester. OK. Let me talk a little bit about what the 
Ranking Member talked about, and that is forced arbitration. Is 
it true that you are using forced arbitration when it applies 
to a real account on fake accounts?
    Mr. Sloan. Senator, we have dealt with that issue with the 
$142 million settlement. We did not waive our right to 
arbitration there, but what we did is we agreed to that 
settlement. And we said to our customers, ``Come in to see 
us.'' We will make it right by them. ``And if you are not 
happy, we will provide you with a mediator.''
    Senator Tester. But that was not the question. The question 
is: Were you using forced arbitration from a real account and 
applying it to a fake account that was set up unauthorized?
    Mr. Sloan. There were instances historically that we did 
that. We are not doing that right----
    Senator Tester. Is that happening today?
    Mr. Sloan. We are not doing that today because we have 
addressed----
    Senator Tester. So will you commit to not use forced 
arbitration on accounts that were set up without the 
authorization of the customer?
    Mr. Sloan. Senator, if there is a situation in which a 
customer----
    Senator Tester. ``Yes'' or ``no'' would work.
    Mr. Sloan. Yes.
    Senator Tester. You commit not to use that, forced 
arbitration?
    Mr. Sloan. If we have set up an account that was 
inappropriately set up or fraudulently set up, without the 
customer, we are going to make it right by them.
    Senator Tester. And you are not going to use forced 
arbitration?
    Mr. Sloan. There is not going to be a reason even to have 
the conversation because we are going to make it right by that 
customer.
    Senator Tester. But, Tim, let me point out that that was 
being used 6 months ago. I think my staff whispered in my ear 
that they were using arbitration on fake accounts that were set 
up on real accounts.
    Mr. Sloan. Senator Tester, I completely appreciate your 
question, and we are not doing that because----
    Senator Tester. OK. And you are not going to do that?
    Mr. Sloan. If we have set up an account----
    Senator Tester. OK, Tim, the only time I get in fights with 
folks who are talking is when they do not give me a ``yes'' or 
``no'' answer when I really ask it. And the question is this, 
and you can answer it another way if you want. But will you 
commit to not use forced arbitration on accounts that were not 
authorized by the customer?
    Mr. Sloan. The easy answer for that, Senator, is yes, 
because we have not done that. We are not doing that.
    Senator Tester. And you are not going to do it moving 
forward?
    Mr. Sloan. We are not doing that.
    Senator Tester. OK. Thank you very much. I used more time 
than I should have. Thank you, Mr. Chairman.
    Chairman Crapo. Senator Scott.
    Senator Scott. Thank you, Mr. Chairman. Mr. Sloan, thank 
you for being here this morning.
    Mr. Sloan. Thank you, Senator.
    Senator Scott. Obviously, the entire Banking Committee is 
at least irritated by what we have uncovered and what you guys 
have discovered over time, and part of it is that from 2011 to 
2015 you had 2.1 million fraudulent accounts. Then you went 
back and did another search, and from 2009 to 2015, it is now a 
70-percent increase. Were all those new accounts from 2009 to 
2011, or did you miss some between 2011 and 2015?
    Mr. Sloan. The majority of the increase was in 2009 and 
2010, and then extending the period to September of 2016. But 
because we used an even more conservative view for the original 
timeframe of 2011 through 2015, we did pick up a few additional 
accounts.
    Senator Scott. So the vast majority of the 70-percent 
increase was 2009 to 2011, and 2015----
    Mr. Sloan. 2009----
    Senator Scott. So it was not within that period----
    Mr. Sloan. Correct.
    Senator Scott. ----you did the first----
    Mr. Sloan. So 2009, 2010, the first part of 2011, and then 
through 2016.
    Senator Scott. So half a million customers were enrolled in 
online bank payment, bill pay, without consent; 800,000 
customers were charged for auto insurance without their 
knowledge. How about homeowners, flood insurance, property 
insurance? Because having spent 15, 16 years in the insurance 
business, I will say that auto insurance is probably the lower 
tier of what banks actually engage in charging customers for 
not having proper insurance. Homeowners, a significantly higher 
percentage of folks typically find themselves being charged by 
the bank temporarily, and flood insurance is another area where 
you see that happen oftentimes.
    So are the numbers in the homeowners and the flood space 
just insignificant, or do you have a number for that?
    Mr. Sloan. We have not found any issues there, Senator.
    Senator Scott. And here is my thought: If you have to come 
back in 6 months--which I think it might be good for you to 
come back in 6 months to have another opportunity for us to 
know what happened over the same time period more thoroughly. 
But my question is: If you have not found any instances of 
inconsistencies in other insurance-related services, that would 
be surprising from my perspective, having dealt with banks 
consistently for 20 years or so.
    How do we know, how do you know--did you say you have 165 
million customers?
    Mr. Sloan. No. We said we looked at 165 million accounts 
for that period.
    Senator Scott. 165 million.
    Mr. Sloan. We have over 70 million customers. We serve one 
out of three U.S. households.
    Senator Scott. We were talking about that. We did not think 
it was one out of two. So out of those 70 million customers, 
you are confident that 3.5 million is the final number?
    Mr. Sloan. Of potentially unauthorized accounts?
    Senator Scott. Yes.
    Mr. Sloan. Yes, Senator, I am.
    Senator Scott. Let me talk for a second about the corrosive 
culture. That does not start at local retail locations. It does 
not start with tellers. A corrosive culture starts at the top, 
and then it seeps into the soil conditions. Then it germinates, 
and then folks feed off of that.
    How have you changed the corporate leadership and the 
corporate culture that will find itself in the soil conditions 
at retail locations?
    Mr. Sloan. So, Senator, first we look at what caused the 
problems in our retail bank. First and foremost, the issue 
within our retail bank was that we had an incentive plan that 
drove an inappropriate sales culture. That incentive plan has 
been ended, and we have rolled out a new incentive plan. The 
feedback that we have gotten from our team since we have rolled 
back that plan--we have now had two full quarters; we will get 
the results of the third quarter--is that they are 
overwhelmingly very pleased with the plan. As we survey them, 
they are telling us that they like the new conditions at Wells 
Fargo. They are very happy. We have actually hired back--and we 
have hired 17,000 new team members into our retail bank since 
September, since we have made these changes. Of those, 10 
percent, or about 1,700, 1,800, were team members that had 
worked in the retail bank, that left because of the old culture 
there, or were dismissed because they did not meet certain 
sales quotas. And to me, those folks coming back and agreeing 
to be part of the team reinforce that the changes that we are 
making in the Community Bank are taking hold.
    Senator Scott. That is good to hear that some folks want to 
come back. My thought is this: Your sales culture is not driven 
by the sales products. I think Senator Rounds can attest to the 
fact as another insurance guy that ultimately it is not the 
sales goals, it is not the product selection. It is the people. 
And it is the people who are in management positions who put 
more pressure for results than an average person can get. And 
so if you have not changed the people, it is quite difficult to 
change the culture.
    Mr. Sloan. I completely agree with you. That is why I named 
the new head of our Community Bank group who I mentioned, Mary 
Mack, who is doing an excellent job. She has gone through each 
one of the levels of management and had everyone literally 
reapply for their jobs. We have reduced the number of managers 
to change the span of control. We eliminated a layer.
    But I agree with you. The issue is not just the incentive 
plan. It was that we created a culture of managers that only 
knew how to manage because of that plan. So getting rid of the 
plan, going through and making sure we had the best managers, 
and then now we are in the process of retraining everybody, 
starting at the top, the senior levels, before we get down to 
the folks in our branches. I completely agree with you.
    Senator Scott. Thank you, sir.
    Chairman Crapo. Thank you.
    Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    Mr. Sloan, when you were named CEO after the fake account 
scandal, you were asked why a career as a Wells Fargo insider 
like you, why that made you the right person to fix the 
fundamental problems at the bank, and you said, ``Because I 
have been making change for 29-plus years at Wells Fargo.''
    So I want to take a look at your time at Wells Fargo. From 
2011 to 2014, the height of when Wells Fargo was cheating 
customers by opening fake accounts, you served as the chief 
financial officer. And as CFO, you spoke to potential Wells 
Fargo investors a lot. On those calls you aggressively promoted 
Wells Fargo's ability to open up new accounts, didn't you?
    Mr. Sloan. No, I did not.
    Senator Warren. No, you did not?
    Mr. Sloan. No.
    Senator Warren. Well, here are the transcripts from all of 
the investor earnings calls that you participated in from 2011 
to 2014. I have read through them, and on these calls no one, 
not even John Stumpf, who was the CEO at the time, bragged more 
about Wells Fargo's ability and commitment to open new accounts 
for existing customers.
    In the April 2011 call, for example--I think I have marked 
that one--you said, ``I cannot wait to get a credit card in 
every one of our creditworthy customers' wallets.'' Nothing 
about whether your customers wanted or needed a Wells Fargo 
credit card. All that mattered was opening new accounts.
    So while you were bragging to investors about opening new 
accounts on these calls from 2011 to 2014, you also personally 
owned roughly 2 million shares of Wells Fargo stock. Is that 
right?
    Mr. Sloan. Senator, I do not recall how much stock I owned 
in Wells Fargo. I am a very proud shareholder.
    Senator Warren. Well, it is actually in your SEC filing.
    Mr. Sloan. Sure. It is public.
    Senator Warren. If that is accurate----
    Mr. Sloan. It is all out there.
    Senator Warren. ----then 2 million shares. So it looks like 
you had a really good thing going. Talk up Wells Fargo's 
ability to open new accounts, get investors excited, and, hey, 
if the stock goes up by a dollar, you make a cool 2 million 
bucks.
    Then in December 2013, almost 3 years into your time as 
CFO, the L.A. Times published a long article on the relentless 
pressure Wells Fargo put on employees to open new accounts. The 
article was based on a review of internal Wells Fargo 
documents, court filings, interviews with more than 30 current 
and former Wells Fargo employees. The article specifically said 
that employees had opened fake accounts in response to this 
pressure.
    Now, you were interviewed for that piece, Mr. Sloan, and 
you said, ``I am not aware of any overbearing sales culture.'' 
Hmm, that is really interesting phrasing: ``I am not aware of 
any problem.''
    So when the L.A. Times came to you and showed you concrete 
evidence of a terrible problem with fake accounts at your bank, 
did you launch an investigation into the issue before brushing 
it off?
    Mr. Sloan. Senator, first, as it relates to my comments in 
2011, I am proud of the credit card products that we have at 
Wells Fargo----
    Senator Warren. That is not the question I am asking. I 
just asked, you brushed it off, you said, ``I am not aware of 
any problem.'' Did you open an investigation when someone laid 
out evidence of fake accounts?
    Mr. Sloan. Senator, in that interview, to the best of my 
recollection, with the L.A. Times, they did not provide me with 
any information. It was soon after that that, as I mentioned, 
2013----
    Senator Warren. So I take that as a no. So when you were 
asked this question----
    Mr. Sloan. That is correct, because by that----
    Senator Warren. ----you did not open an interview--you did 
not open an inquiry into it. Is that right?
    Mr. Sloan. Senator, again, the L.A. Times did not provide 
me with any documentation----
    Senator Warren. So you had no clue----
    Mr. Sloan. It was a phone call.
    Senator Warren. All right----
    Mr. Sloan. After that time----
    Senator Warren. Did you read--did you read the article?
    Mr. Sloan. I read the article, yes.
    Senator Warren. And then you opened an investigation 
immediately?
    Mr. Sloan. At the same time the article was coming out, 
that was the time when the Community Bank elevated this issue 
to the senior leadership team----
    Senator Warren. OK, so let us talk about----
    Mr. Sloan. ----and that is the time that we began to take 
action.
    Senator Warren. Let us talk about that time. You did not 
look into the fake accounts, but you went right back to pumping 
up the stock price by bragging about Wells Fargo's record 
number of new accounts on your very next investor call.
    Now let us forward to 2016, 2 months before the fake 
account scandal became public. You were then the chief 
operating officer of Wells Fargo. An interviewer asked you 
whether you thought the bank had pushed sales goals and cross-
selling too far, and your answer was, ``No. The fundamental 
strategy that we have is not going to change.'' That is July of 
2016, just before this breaks open.
    According to Wells Fargo's own investigation, by July of 
2016, you knew that thousands of employees had been fired for 
opening fake accounts and other sales violations. You knew 
aggressive cross-selling goals were to blame. And, still, you 
publicly said the bank did not have a problem. Right?
    Mr. Sloan. Senator, that is incorrect. You----
    Senator Warren. You did not say this, that your----
    Mr. Sloan. Senator, could you read the entire quote? And 
could we go through the entire presentation? Because I think in 
that----
    Senator Warren. Your answer----
    Mr. Sloan. Senator, I think in that presentation----
    Senator Warren. ----when asked about whether or not----
    Mr. Sloan. ----you will see----
    Senator Warren. ----you pushed employees too far, your 
answer was, ``No. The fundamental strategy that we have is not 
going to change.'' And that is a month----
    Mr. Sloan. And I was referring to the vision----
    Senator Warren. ----before this breaks publicly.
    Mr. Sloan. I was referring to the vision of our company----
    Senator Warren. The vision----
    Mr. Sloan. Of our company.
    Senator Warren. ----including the fake scandals you----
    Mr. Sloan. No, Senator----
    Senator Warren. ----were being asked about?
    Mr. Sloan. Every time I give a presentation to our team 
members, I start with our vision, which is to ground people in 
the culture of our company, which is that our job is to satisfy 
our customers' financial needs and to help them succeed 
financially.
    Senator Warren. Mr. Sloan, I am glad----
    Mr. Sloan. That is the context that I made that statement. 
Since I have become CEO, I have made fundamental changes to 
address the issues that we are talking about today.
    Senator Warren. Mr. Sloan, you were asked about pressure on 
employees which caused the fake account scandal. We all know 
that now. It is public. You knew there was a problem, and when 
you were asked about it, you lied. This is about personal 
responsibility. Wells Fargo cheated millions of people for 
years. The Federal Reserve should remove all of the current 
board members who served during the fake account scam. And, Mr. 
Sloan, you say you have been making changes at Wells Fargo for 
30 years, but you enabled this fake account scam. You got rich 
off it, and then you tried to cover it up. At best, you were 
incompetent. At worst, you were complicit. And either way you 
should be fired.
    Wells Fargo needs to start over, and that will not happen 
until the bank rids itself of people like you who led it into 
this crisis.
    Thank you, Mr. Chairman.
    Mr. Sloan. Mr. Chairman, could I respond to that?
    Chairman Crapo. Yes, you may.
    Mr. Sloan. OK.
    Senator Warren. I want an equal amount of time.
    Mr. Sloan. Senator, a couple things. First--and I will get 
to your criticism of me in a moment, but first let us talk 
about the board. I think the board has taken very important 
steps in terms of a thorough, independent investigation that 
has been made public. That is number one.
    Number two, the board has taken very strong action in terms 
of executive accountability that is unfortunately some of the 
highest in corporate American history. Again, unfortunate. So I 
do not believe that your criticisms of the board are accurate.
    As it relates to me, again, I think the reason that I am 
the right person to run this company today, notwithstanding 
your criticism, is because I have been making change at this 
company for 30 years. I have made mistakes. I certainly have 
not been perfect. But I think having that knowledge of the 
company, having the ability to make the change, the actions 
that I have taken since I have become CEO 11 months ago have 
made fundamental change at this company. So I am not afraid to 
make hard decisions when it is needed, and I have the support 
of 270,000 people. That is why I think I am the right person.
    Senator Warren. Can I just make a short comment on this?
    Chairman Crapo. Very brief.
    Senator Warren. I know we are over. But you really want to 
say, ``Are you kidding?'' You know, look, you have been there 
for 30 years, and every one of my colleagues on both the 
Republican side and the Democratic side who has spoken so far 
have talked about a broken culture at Wells Fargo, have talked 
about the fact that the problem starts with leadership. The 
people who were there and leading Wells Fargo during the time 
of a years-long scam and multiple scams, as our Chairman 
pointed out, those people should not be left in charge of this 
business. And when you promoted exactly what was wrong with 
this bank over and over and over, you went to the stock market 
and you bragged about it. You made money personally off it. 
When you were asked about it, you did not tell the truth, and 
you tried to cover it up.
    Wells Fargo is not going to change with you in charge.
    Chairman Crapo. Senator Rounds is next, and I do ask the 
Senators to pay attention to the time limits.
    Senator Rounds. Thank you, Mr. Chairman.
    I know that we are not supposed to be in the middle of 
this. We each normally get 5 minutes, and so I am just going to 
go back because I know that in some cases you do not get the 
opportunity to respond. But I think there was one area here 
that I want to hear your full response to it, and that is, you 
said that basically, as Senator Warren has indicated, you 
wanted to see everybody with a credit card or at least all of 
your folks with a credit card. Would you please go into what 
you meant by that statement?
    Mr. Sloan. Well, sure. I mean, we are in the banking 
business, and one of the products that we provide to our 
customers is a credit card. And any one of our customers that 
comes in to see us that is interested in a credit card, we 
would like to provide it to them. I am proud of the hard work 
and effort of all of our team members that work in our credit 
card group. We have seen growth in that group because customers 
like using the product. I am not embarrassed about that. 
Whatever adjective or adverbs are used to describe what I may 
have said or did that are taken out of context is not 
consistent with the fact that our job is to satisfy our 
customers' financial needs. If that financial need means they 
want a credit card and if we have the right product, I would 
love for them to have it. That is what we do.
    Senator Rounds. Would you agree that there was a broken 
culture at Wells Fargo during this time?
    Mr. Sloan. Senator, I would agree that in our Community 
Bank we had fundamental problems that created serious cultural 
issues. In terms of the rest of the company, there were other 
issues, but I would not say that in the rest of the company it 
was a broken culture.
    Having said that, as CEO, and acknowledging that I have 
been there for 30 years, there are some that do not think I 
should be in this role. We have heard that today. And so what 
did we do as it relates to culture?
    We went out and we asked third parties to help us do new 
culture surveys to make sure that we were not missing anything, 
because even though I have been there for 30 years and I have 
done things sometimes good and sometimes I have made mistakes, 
I do not want to be in a position where it is just what I think 
we should be doing. I want to make sure that we are listening 
to outside experts, we are listening to all of our 
stakeholders, and we are listening to our team members. So we 
are making fundamental changes in the company to address any 
sort of cultural weaknesses that we have.
    Senator Rounds. One area that I think we have got concern 
with in particular is Wells Fargo has--I want to make sure that 
members of the military, that they really do have some special 
legal protections under the Servicemembers Civil Relief Act, 
such as the protections to the soldier's credit or property 
when they are serving on active duty. And I want to go into 
this, but can you please discuss some of the specific ways that 
Wells Fargo has tried to improve its compliance with the 
Servicemembers Civil Relief Act, particularly in light of the 
firm's sales practice issues? Can you go into this a little bit 
to give us some assurance that there have been changes made 
with regard to how servicemembers are treated with regard to 
their credit activities?
    Mr. Sloan. Senator, we care about all of our customers, but 
I do not think there is any one customer group that we care 
more about than our service men and women. We created what we 
call a ``Center of Excellence'' that looks across the entire 
company to manage SCRA matters. That Center of Excellence is 
staffed with experts that only look at the ways in which we can 
provide the appropriate benefits to our service men and women. 
We work very closely with the Defense Department to make sure 
that we get on a daily basis updates from the Defense 
Department in terms of which service men and women, which of 
our customers are now on active duty. That puts them in a 
completely different category, and we are very proud of the 
fact that we have made significant improvements.
    We have had historical issues, Senator. There is no 
question about that. But we needed to make fundamental change 
to create a Center of Excellence, to staff it appropriately, 
and then to make sure that they are looking across the company.
    In addition to that, I am very proud of the fact that we 
have 8,500 team members who were veterans. I have made a 
commitment as CEO that we want to hire another 20,000 by 2020. 
In addition, we have provided financial education services to 
hundreds of thousands of service men and women so that they can 
manage their finances appropriately. And we have donated more 
than 300 homes free of charge to wounded veterans so that they 
can have a place to live.
    Senator Rounds. You have used a third party to come back in 
and to do the analysis on the accounts and so forth and to find 
accounts and to identify problems. Are you going to continue to 
use a third party to go back in and to double-check in terms of 
whether or not the proposals that you have laid out and your 
intents are actually being followed through on?
    Mr. Sloan. Well, as it relates to the 165 million accounts 
and going back the additional 8 years, that is effectively what 
we did. We went back and double-checked the prior period that 
we had disclosed and expanded that. We have put in additional 
policies and procedures in place right now to be able to 
address those issues, and those are independent of the business 
line. That was one of the issues we had before, when there was 
an issue historically.
    Senator Rounds. My time has expired, but are you going to 
continue to use a third party to review in terms of due 
diligence to make sure that it is actually--that the changes 
that are being made are actually being implemented?
    Mr. Sloan. We are bringing in third parties to look at 
various policies and procedures across the entire company, so 
the answer is yes.
    Senator Rounds. Thank you.
    Thank you, Mr. Chairman.
    Chairman Crapo. Thank you.
    Senator Schatz.
    Senator Schatz. Thank you, Mr. Chairman.
    Mr. Sloan, the OCC has the statutory authority to revoke a 
national charter of a bank if the bank is found to violate the 
National Bank Act. Why shouldn't the OCC consider revoking your 
charter?
    Mr. Sloan. Senator, because we provide products and 
services to one out of three American households. We have 
talked about many mistakes that we have made, but today, more 
oftentimes than not, we do that appropriately. The company is 
growing. The company provides jobs to 270,000 people----
    Senator Schatz. So you are too big?
    Mr. Sloan. No. No, we are not too big at all. I am just 
reinforcing that every day we have 270,000 team members that go 
out and satisfy the needs----
    Senator Schatz. But that sounds like what you said, is that 
the reason that your charter should not at least be considered 
for revocation is--the first thing out of your mouth was your 
size.
    Mr. Sloan. No. The first thing out of my mouth was our 
customers, that we serve one out of every three customers. We 
take that responsibility very seriously. When you look at the 
bank in totality today, we are doing many more things right 
than we are wrong. But I appreciate that today we are talking 
about Wells Fargo 1 year later and the changes that I have----
    Senator Schatz. Sure. I am sorry. I am going to cut you 
off.
    Mr. Sloan. I understand.
    Senator Schatz. I want to go 5 minutes only. That does 
sound to me like too big. I guess we will allow the members of 
the panel and the audience to make a judgment about whether 
your answer sufficed.
    You know, I am not an expert in banking, so I want you to 
explain this to somebody back home. You made $21 billion in 
profits last year. You made a nice salary. I do not want to 
personalize this. Your board makes better than a nice amount of 
money. You were COO when a lot of this went down, and now you 
are CEO. So explain to the man on the street why this is fair.
    Mr. Sloan. Senator, I am not 100 percent sure--I know what 
you mean by ``this,'' but let me----
    Senator Schatz. I mean, you get a promotion. I mean, all 
the people in charge get lots and lots of money. And I mean, 
all the--not all the consumers, but lots of consumers get 
harmed. So just explain to me in plain English why this is 
fair.
    Mr. Sloan. Senator, I have taken responsibility for the 
mistakes that have been made at the company. I am taking action 
in my role as CEO to make Wells Fargo a better bank than it was 
a year ago. It will be a better bank in the future. We are 
taking concrete----
    Senator Schatz. I guess I will just point out----
    Mr. Sloan. ----action, and we are providing--I am proud of 
the fact that our bank is the largest small business lender, 
the largest home lender. We make a difference to Americans 
every day. You deserve----
    Senator Schatz. Back to your size.
    Mr. Sloan. You deserve----
    Senator Schatz. Hold on. I only have 2 more minutes. It 
occurs to me that it is only in financial services, only in 
this industry where people can make such massive errors and 
there does not appear to be accountability, and only because of 
your size do we not understand totally which statutory tools, 
which regulatory tools, which consumer-based tools we have at 
our disposal to find a remedy.
    At a briefing for our staff, Wells Fargo representatives 
explained that banks would make goodwill payments to customers 
who had their cars repossessed and their credit trashed as a 
result of auto insurance that you bought for them. As I 
understand it, the bank will designate a third-party claim 
administrator and ask customers to send in a form explaining 
how they were harmed and how much money they need to be made 
whole. According to your representatives, the claims are 
basically going to be paid up to $2,000 sort of no questions 
asked.
    So then my question is: Why not just cut checks up to 
$2,000 for all of those impacted? Because the only reason I can 
think of putting the burden on consumers to ask for this 
goodwill money that you have already approved is that you are 
hoping many of them will not do it. So can I have your 
commitment to go ahead and presumptively push out the money 
rather than force people to figure out that they have this 
right and that they are likely to be approved up to $2,000, but 
they have got to go through the paperwork? Can I have your 
commitment today?
    Mr. Sloan. No. What you have my commitment is that we are 
making the $500 goodwill payment to every one of those 
customers, whether they were impacted or not. And you have my 
commitment that we will make sure that we will make it right 
for those customers to the extent they were impacted. If we 
need to do more than $2,000 to make it right, we will do that.
    Senator Schatz. Can you please provide the Committee with a 
list of all legislation that Wells Fargo has lobbied for or 
against since 2010?
    Mr. Sloan. We will respond to whatever inquiry you would 
like us to respond to.
    Senator Schatz. That is my inquiry. If you could respond in 
writing for the Committee.
    Mr. Sloan. Sure.
    Senator Schatz. Thank you.
    Mr. Sloan. Thank you.
    Chairman Crapo. Senator Tillis.
    Senator Tillis. Thank you, Mr. Chair. Mr. Sloan, thank you 
for being here.
    I just want to go back and make sure I have got the numbers 
right. I think the third party assessed 90 out of 93.5 million 
accounts that were opened, in about a 4\1/2\ year lookback, 
there were about 2.5 million that appeared to be unauthorized; 
and an 8-year lookback was 165 million accounts opened, and I 
think that was about 3.5 million unauthorized?
    Mr. Sloan. Potentially unauthorized, Senator.
    Senator Tillis. I have got to go back, because I want to 
talk more about how you focus on the customer and make this 
very easy for them to recover from. I serve on the Veterans' 
Affairs Committee, and I got a call from a veteran in North 
Carolina who had--his wife was opening the mail, and she 
mentioned to her veteran husband, ``Honey, I did not know you 
were dead.'' The VA had sent a notice that he had somehow got 
miscategorized and he was deemed dead. He thought it was a 
simple problem. He had his military ID card, called up the VA, 
and the VA said, ``Well, you have got reams of paperwork and 
several phone calls that you will need to make to actually get 
reinstated and get your veteran's benefits.''
    Now, tell me how in making this right that I am not getting 
on a phone listening to elevator music, getting transferred to 
several different accounts--in other words, how are you 
maximizing--minimizing the customer's time and getting this 
right? And, similarly, how are any effects on underlying credit 
reporting agencies being dealt with, too, as a part of getting 
this right? In other words, is it my problem to deal with maybe 
clearing up those accounts that I did not authorize to an 
Equifax or through the credit agencies? Tell me a little bit 
about that process.
    Mr. Sloan. So in answer to your first question, Senator, in 
the fourth quarter we reached out to 43.5 million customers via 
their statements and also by email, and we said something very 
simple: ``If there is anything about your accounts that you 
think is not right, come in and see us, and we will make it 
right by you.'' And about 41,000 have come in to see us. Most 
of those situations have been resolved with the customer right 
there. To the extent that they are not pleased with what we 
have offered, we have offered them free mediation services. 
Again, we pay for them, an independent mediator, and we address 
their issues.
    One of the other fundamental changes that we have made in 
the company since I became CEO is the customer service element 
within our branches. Historically, when a customer came in, we 
had not delegated the ability for a banker in one of our 
branches or a teller or a service manager to deal with it on 
the spot. We said, ``Hey, great. You have got an issue. Call 
our 1-800 number.'' And that was not a very good customer 
experience, to your point.
    So under the new leadership of our new head of Community 
Bank, Mary Mack, what she has done is she has delegated that 
authority down to the branches so that when a customer comes in 
and they have an issue, we are trying to deal with as many of 
those as we can.
    In addition, we have increased staffing for our phone bank 
or customer service as well as the customers that come in via 
online or via mobile. So we are trying to do a better job.
    I introduced six goals for our team in March, and the 
number one goal is that we want to provide the best customer 
service and advice in the industry. We have got work to do, 
Senator. I would love to be able to tell you that we are number 
one right now, but we are not. But I am going to make sure that 
we have enough resources.
    Senator Tillis. So we are trying to figure out, you know, I 
used the 93 million and 2 million potentially unauthorized, or 
165 million, 3.5 million potentially unauthorized. And then it 
is a fraction of those that actually incurred fees or any 
charges. Is that correct?
    Mr. Sloan. That is correct.
    Senator Tillis. OK. So for all the other ones, just as a 
self-governing matter, I mean, I worked in the banking industry 
before I went into politics. You do not like opening up 
accounts that have no activity because there is an inherent 
cost of operations that you are incurring. So, I mean, there is 
a natural--I am trying to figure out how--where the circuit 
breaker did not click and whether or not all those circuit 
breakers, in your opinion, have been fired so that we are now 
trying to get to the governance issues that I have confidence 
that you would work on, Wells Fargo would work on. But tell me 
just a little bit more about governance in my remaining 25 
seconds.
    Mr. Sloan. Well, as it relates to governance for the entire 
company, the board engaged in an independent investigation. 
That has been made public. The board made some changes based 
upon that in terms of executive accountability, which totaled 
$180 million of compensation that was clawed back or not 
authorized. There is a new CEO. That is me. We have an 
Operating Committee of which 5 of the 10 members now have new 
roles. We have taken the responsibility and the criticism in 
the board's independent report that said that management did 
not provide information to the board as well as we could have. 
I completely agree with that. We have revamped the way we have 
done that. So there have been a lot of governance changes.
    But most importantly, I think, within the company, it is 
taking the enterprise risk control functions--human resources, 
compliance, credit, you name it--and centralizing all those so 
that we have a better check and balance between the business 
lines and risk, and then creating a Conduct Office in the risk 
function to be able to independently look at complaints and 
ethics lines questions and all kinds of things that would 
indicate that we have any issues in the company. I get those 
reports now, and that was not happening a year ago.
    Chairman Crapo. Senator Van Hollen.
    Senator Van Hollen. Thank you, Mr. Chairman.
    Mr. Sloan, I was listening to your responses to Senator 
Tester about the issue of forced arbitration. A simple 
question. Who knows best what is in a customer's interest, 
Wells Fargo or your customer?
    Mr. Sloan. I think that it frequently is the customer, and 
that is why it is very important from my perspective to get it 
right so that we do not get to the point----
    Senator Van Hollen. But if your customer knows best, why do 
you deny them the ability to go to court? Why do you require 
your customers, if they know best, to go to mandatory 
arbitration?
    Mr. Sloan. Senator, we do not do that for all of our 
products and services. We do that----
    Senator Van Hollen. Yeah, but why do you do it for some of 
them if your customer knows best?
    Mr. Sloan. Well, again, I think many----
    Senator Van Hollen. It is a simple question. If your 
customer knows best, why do you deny them the opportunity to go 
to court? Why do you require arbitration?
    Mr. Sloan. Because, Senator, most of the independent 
studies, including the ones that was done by the CFPB 2 years 
ago, indicate----
    Senator Van Hollen. But if a customer----
    Mr. Sloan. ----that it is better--that it is better for the 
customer----
    Senator Van Hollen. Mr. Chairman, if the customer makes--a 
customer brings the case, right? Right? So if a customer 
decides it is in his or her best interest, forget about 
studies. We also know what the Consumer Financial Protection 
Bureau--what they recommended. They recommended that we get rid 
of forced arbitration.
    You said to Senator Tester that you were not applying 
forced arbitration with respect to the fake accounts. Remember 
that answer?
    Mr. Sloan. Yes, I did.
    Senator Van Hollen. There is an article here, Monday, 
September 18, 2017, just a short time ago. In a case in Utah, 
Wells Fargo lawyers have actually taken the position that the 
forced arbitration does apply to those fake accounts. Are you 
aware of that case?
    Mr. Sloan. I am not familiar with that case, Senator. I 
apologize.
    Senator Van Hollen. Well, let me read to you from a Reuters 
excerpt, and they reported this on September 18, 2017. It says: 
``In a motion on Monday, lawyers for Wells Fargo said consumers 
signed agreements to arbitrate disputes when they first opened 
their accounts at the bank, and those agreements also cover 
other accounts allegedly opened without their consent.'' That 
directly contradicts your testimony to Senator Tester, doesn't 
it?
    Mr. Sloan. Senator, I will have--I will look into that 
matter.
    Senator Van Hollen. If that is true----
    Mr. Sloan. Senator, I will look into that matter, and I 
will respond.
    Senator Van Hollen. If that is true, it directly 
contradicts your testimony to this Committee, doesn't it?
    Mr. Sloan. Senator, I will look into that matter----
    Senator Van Hollen. I am not asking you to look into it. I 
am asking you to say if that is true, doesn't that contradict 
your testimony?
    Mr. Sloan. Senator, I am not familiar with the facts of the 
situation, so I cannot answer that question. But I would be 
happy to look into it and respond to you.
    Senator Van Hollen. Well, if it is true, it violates--it is 
contradictory--I do not know if you were sworn in today or not, 
but it violates your earlier testimony.
    Let me ask you about your other overdraft fees scandal. 
When it comes to the overdraft fees scandal, you are still 
exercising your right to deny customers the right to go to 
court. In other words, you are enforcing the arbitration 
agreement. Is that----
    Mr. Sloan. Senator, I am not familiar with the overdraft 
scandal that you are referring to.
    Senator Van Hollen. The overdraft fees where you were 
charging--you were not--where you were charging customers fees 
on overdrafts of fake accounts?
    Mr. Sloan. Senator, we do not--we charge customers fees 
when they overdraw their accounts, but I am not familiar with 
an overdraft scandal. If it relates to any unauthorized 
accounts that were potentially unauthorized accounts that could 
have been part of that 3.5 million, to the extent that there 
was any fees charged, we have already reimbursed those to the 
customers. So they have been made whole.
    Senator Van Hollen. Well, apparently in a case in the 
Eleventh Circuit Court of Appeals, you are--we will follow up 
with you, but it looks like also----
    Mr. Sloan. Please.
    Senator Van Hollen. How about the practice where you were 
selling auto insurance to people who did not ask for it or did 
not want it? That was a situation I think about 500 Marylanders 
or more--actually, about 10,000 Marylanders were affected by 
that; 500 had their cars repossessed. It was actually the 
subject of an NPR radio story. Did you have a chance to hear 
that radio story?
    Mr. Sloan. I did not, Senator. I listen to NPR, but I did 
not hear that.
    Senator Van Hollen. I would encourage you to do that 
because one of my constituents came out to go to work one 
morning. His name was Michael Feifer. He was heading out in 
February to his job in Maryland at a company that builds 
guitars. He walked to the place where he parked his car. It was 
not there. He called the police, said he was livid, said he 
thought someone stole his car. It turns out it was not a car 
thief at all. It was Wells Fargo's repossessors. He was 
flabbergasted because his insurance was current. He went to 
Wells Fargo. The folks at the local branch said, you know, 
``This is nuts. You are covered.'' It took them, the employees 
of Wells Fargo, over 2\1/2\ hours just to connect to folks in 
another branch.
    My question is very simple: If it takes the employees of 
Wells Fargo 2\1/2\ hours to get in touch with others, if it 
takes individuals having to fight the system by themselves, 
don't you understand why it makes sense for people to be able 
to band together to file their claims against a big company 
like yours rather than have to fight you one by one?
    Mr. Sloan. Senator, what I understand is that if we make a 
mistake, we need to make it right, and we have got to improve 
our processes. What I would like is, to the extent that Mr. 
Feifer has not been made whole by us, I would like to speak 
with him personally to make sure that we are handling the 
situation to his satisfaction if we made a mistake.
    Senator Van Hollen. Well, Mr. Chairman, I would just point 
out that you said it yourself. You were informing your 
customers to know about class action settlements so they can be 
made whole. That is the way lots of people can be, you know, 
made whole at once. Mr. Feifer is like one guy fighting Wells 
Fargo. I find it amazing that you would say your customers come 
first, and then you deny them the choice of how they seek their 
compensation, how they seek justice.
    Thank you, Mr. Chairman.
    Chairman Crapo. Senator Perdue.
    Senator Perdue. Thank you, Mr. Chair. Mr. Sloan, thank you 
for being here.
    Mr. Sloan. Thank you, Senator.
    Senator Perdue. In how many States does Wells operate 
today?
    Mr. Sloan. In all of them.
    Senator Perdue. Are you regulated in every one of those 
States?
    Mr. Sloan. Yes.
    Senator Perdue. How many Federal regulators do you have 
today?
    Mr. Sloan. Oh, gosh.
    Senator Perdue. OCC, Federal Reserve, SEC, CFPB; is that 
correct?
    Mr. Sloan. And then, in addition, we have securities 
regulators, too.
    Senator Perdue. So were you supervised during this period 
of time, 2011 to 2016, were you supervised by the Federal 
Reserve?
    Mr. Sloan. Yes.
    Senator Perdue. Did they in their oversight--and I am sure 
they were quite involved. Did they reveal any material issues 
during that period of time?
    Mr. Sloan. Oh, they have, but that is confidential 
information that I cannot disclose. But we have an active 
dialogue in----
    Senator Perdue. Relative to this breach of----
    Mr. Sloan. In terms of the retail account?
    Senator Perdue. Yes.
    Mr. Sloan. No, they did not.
    Senator Perdue. Were you supervised by the OCC during this 
period of time?
    Mr. Sloan. Yes.
    Senator Perdue. Did that oversight reveal any material 
issues relating to this situation?
    Mr. Sloan. Yes, it did, and the prior Comptroller of the 
Currency, Mr. Curry, has testified to that.
    Senator Perdue. Did the CFPB come up with anything, any 
material issues, during this period of time?
    Mr. Sloan. Not to my knowledge.
    Senator Perdue. And in dealing with these regulators, are 
there any outstanding issues today relative to this----
    Mr. Sloan. Oh, sure, absolutely. You know, I have a long 
to-do list.
    Senator Perdue. And how is the company reacting to that 
list of corrections?
    Mr. Sloan. We are listening. I mean, I think that----
    Senator Perdue. I am sure you are implementing, too, right? 
The question I have is----
    Mr. Sloan. Well, that is where I was going. We are 
listening to their concerns, and we are making fundamental 
changes not only because I think they make sense as CEO, but 
because our regulators also believe that there are other 
changes that we need to make. And we are being very responsive. 
I am sure if they were here, they would say that we are not 
moving as quickly as they would like, which I appreciate that. 
But our commitment to fixing anything that is broken and making 
Wells Fargo the best bank in this country is sacrosanct from my 
perspective.
    Senator Perdue. Well, I think you would agree, we in a 
private conversation--there is no way to sugarcoat this as a 
serious issue, and I appreciate your handling it the way that 
you are.
    I want to get to the governance issue, though. You have an 
internal audit capability inside Wells Fargo today, right?
    Mr. Sloan. That is correct.
    Senator Perdue. And as CFO, that was your responsibility. 
It is a sizable organization. Roughly how many people across 
the country are involved in that internal audit effort?
    Mr. Sloan. Oh, gosh. Well, first let me correct something.
    Senator Perdue. Hundreds or----
    Mr. Sloan. Senator, the audit group is actually a 
separate--it reports separate from the financial organization 
because they have to audit the financial organization. So our--
--
    Senator Perdue. To whom do they report?
    Mr. Sloan. The auditor, the chief auditor, David Julian, 
reports to me, but then has a direct reporting line also to our 
Audit and Examination Committee.
    Senator Perdue. Right. Also, your board has an external 
auditor as well.
    Mr. Sloan. That is correct.
    Senator Perdue. And to whom does that external auditor 
report?
    Mr. Sloan. Well, they report to our shareholders.
    Senator Perdue. Right.
    Mr. Sloan. And then they also provide independent reports 
to our board on our financial condition and other matters.
    Senator Perdue. So during this period of time, when these 
indiscretions were occurring, did any report from either the 
internal audit capability or the external audit capability 
disclose any of these maladies?
    Mr. Sloan. The internal auditors did, though I would say 
that that was another area they could have done a better job. 
And I think David Julian, our chief auditor, has made 
fundamental changes there. But when it was reported to the 
senior leadership team, we should have taken more aggressive 
action.
    Senator Perdue. Has any other breach of operation occurred 
that has not been made public yet?
    Mr. Sloan. Well, minor breaches, maybe, but that was one of 
the reasons why we went above and beyond the normal standard of 
materiality in our second quarter 10-Q to provide an update on 
things like CPI, on GAP insurance, on hard holds, on OFAC, on 
RMBS, a variety of different matters, because as I have 
encouraged our team, we need to make sure that we are more 
transparent to our stakeholders than we have ever been.
    Senator Perdue. So going forward, has the scope of the 
internal audit function and the external audit function been 
expanded relative to this problem?
    Mr. Sloan. It has expanded, and it has been reorganized to 
reflect the reorganization that we have done within our 
company. I do not know the answer as to the number of folks 
from KPMG that cover us today, but my guess is there is more 
than was a year ago and the year before.
    Senator Perdue. Thank you, Mr. Chairman.
    Chairman Crapo. Thank you.
    Senator Heitkamp.
    Senator Heitkamp. Thank you, Mr. Chairman. One of the most 
important things that we can accomplish here is to figure out 
whether we actually see and have a sense that there is a 
culture change at Wells, Mr. Sloan. And I have to tell you, I 
have been listening to the line of questioning, and I think 
anyone with an open mind would question whether we are actually 
seeing a culture change. So let me kind of run through this.
    Senator Warren asked you about the L.A. Times at the time 
that this story broke, and we can all acknowledge that the L.A. 
Times had a huge role in this. And you said, well, you did not 
have evidence about that, so you did not really respond to it. 
But then once it became a bigger scandal, then we are going to 
fix it.
    So then we find out when we talk about it, well, we are 
going to fix it. We now realize that this is a problem, and 
there has been mistakes made.
    And then we find out, after the ``we will fix it,'' that 
there was knowledge of this problem years before the L.A. Times 
story, that upper management knew about this problem and 
thought that they had managed it and fixed it. They did not fix 
it.
    OK. Then we fire employees who open fake accounts, saying 
they are the problem. It is this Community Bank problem. That 
is where the problem is.
    But you also fired those who refused to play the game, and 
we know that that happened because they have since participated 
in public discussions about how they tried to whistleblow on 
this. And then, again, when we raise these issues, you say, 
``Trust us. We are fixing it.''
    And they come before this hearing--it was not you, Mr. 
Sloan, but come before this body and say, ``Wow, this is all 
you need to know. We now have turned the corner, and it is all 
going to be OK.'' Only then to have this insurance scandal 
exposed. But now we hear, ``We are going to fix it.''
    So, OK, I am, like, that is three times, you know? I know a 
little bit about baseball. It seems like you strike out after 
three times of promising something you do not see. But what I 
want to say to you, because it goes back to your response to 
Senator Warren about the L.A. Times. In the course of just 
about 15 minutes here, you were told about an overdraft problem 
in the Eleventh Circuit. Now, if I ran an organization, I would 
know if I were in the Eleventh Circuit with a discussion on 
overdraft protection. But you said you were not familiar. That 
sounds familiar.
    Then you were asked about a legal position taken in Utah 
about arbitration, which was in the media. You said, ``I do not 
know about that.'' I would know about that if I were you. I 
would know about that if I were you, especially coming before 
this body.
    And then a national news story about Wells Fargo being 
involved in a wrongful repossession of a car, a news story that 
literally millions of people listened to, and you are not 
familiar with it.
    This is problematic for us, because we need to see that 
there is actually a culture change, that there is a reaction to 
these kinds of consumer failures. And we do not really hear it 
here. What we hear a lot of is, ``Do not know. Look into it. We 
really care about the customer.''
    Now, I would assume that where we are right now is a lot of 
soul searching at the highest ranks--soul searching at the 
highest ranks of Wells Fargo. And correct me if I am wrong. 
What I heard you keep saying is mistakes were made at the 
Community Bank, driven by wrongful incentives that were 
provided to the employees. Right?
    I have not heard you say, other than taking responsibility 
for the incentives, I have not heard you say mistakes were made 
at the highest level of Wells Fargo. I mean, we can say, yes, 
we have lost a CEO and, yes, there has been some punishment 
and, yes, we are moving over. But at the bottom line, I do not 
hear a level of culture change that satisfies me today. And I 
think that that is something that is very problematic for Wells 
Fargo going forward because ``I am not familiar'' is not an 
answer we should be getting here. It should be, ``Yes, we are 
aware of that. We are fixing it.'' And when we only hear ``I am 
not familiar,'' we wonder what else we are not familiar. And I 
would caution you, when you say this is everything, that is 
what the last CEO told us. And then the insurance scandal 
broke.
    So, you know, it is up to your board to figure out what 
they are going to do. But I hope you take these comments as 
constructive because it is not helpful for you to say you are 
not familiar.
    Mr. Sloan. Senator, I appreciate your comments, and in my 
opening statement I was very clear that we take responsibility 
for the mistakes that we have made. And when I say ``we,'' I 
mean me. I am the CEO of this company. The buck stops with me 
every day. I apologize that I am not familiar with every 
matter, but to the extent that I am not, we are going to follow 
up on all of those.
    As it relates to Senator Warren's comments, she asked me 
not if I was familiar--about the L.A. Times, she talked 
specifically about information that the L.A. Times provided and 
if I took any action. The L.A. Times in that interview did not 
provide me with any information, so I cannot take action if the 
L.A. Times did not provide.
    Having said that, we took action when that information got 
to the senior leadership team. I have taken responsibility for 
the fact that we did not take aggressive enough action. That is 
why we are making the fundamental changes that we are making at 
Wells Fargo to make things right for our customers and our team 
members and all of our stakeholders.
    But having said that, Senator Heitkamp, I completely 
appreciate your frustration. I am angry about what happened at 
this company, and I pledge to you that not only are we fixing 
it, but we will fix it.
    Senator Heitkamp. I just want to again point out that you 
cannot segregate the top from the bottom, and it seems to me 
that when you say ``we,'' we did not get any information from 
the L.A. Times, you should not have had to have information 
from the L.A. Times. You should have read the story and said, 
``Is this true? Let us go find out.''
    Mr. Sloan. And we did. And we did.
    Senator Heitkamp. Well, you knew it was true because you 
knew about this years before that.
    Mr. Sloan. No, Senator Heitkamp, I did not. And the board 
actually conducted an independent investigation where they 
looked at millions of documents, they interviewed hundreds of 
people, and their conclusion was consistent with what I have 
said publicly here and elsewhere in the last year, and that is 
that the issues within the Community Bank were elevated to the 
leadership team, including me, in late 2013. We should have and 
could have taken more aggressive action. I apologize for that. 
We have taken that aggressive action right now to fix the 
things that are broken.
    Senator Heitkamp. And what year was the L.A. Times story?
    Mr. Sloan. 2013.
    Senator Heitkamp. I think that we had a document from the 
last CEO going back to 2008, but I will have to hunt it up. I 
do not have it in front of me.
    Thank you, Mr. Chairman.
    Chairman Crapo. Senator Cotton.
    Senator Cotton. Thank you, Mr. Chairman. Mr. Sloan, welcome 
to the Committee. Thank you for your appearance here today.
    Mr. Sloan. Thank you.
    Senator Cotton. I appreciated our visit in my office last 
week as well. We talked about some of the challenges that Wells 
Fargo has faced because of mistakes they made last year, not 
just for the customers but for the tens of thousands of men and 
women that work in your branches all around the country, to 
include Arkansas, who are worried about the future of the 
company and what it means for their ability to put food on 
their kids' table and put a roof over their heads.
    One of the quickest ways that businesses can see an impact 
whenever they make a mistake like this or they display poor 
judgment is simply through competition, that your customers can 
go elsewhere, they can go to another bank. But one thing that 
Jamie Dimon has spoken about is the regulatory moat around big 
businesses, that as it becomes harder for smaller businesses to 
deal with the regulations that Washington has imposed upon 
them, it also gives big businesses less incentives to be 
responsive and, therefore, less choice to consumers. One good 
example of this is certain airlines that have mistreated their 
customers on occasions, yet there is really very few choices 
that you can go to if you want to fly from one city to the 
next.
    What kind of market reaction has Wells Fargo seen over the 
last year in terms of losing customers or going elsewhere or at 
least pressure from other of your big competitors?
    Mr. Sloan. Well, Senator, I think the banking business in 
the U.S.--and, again, I have been involved in the business for 
30 years--is very, very competitive. Big banks, medium size 
banks, small banks, nonbanks provide customers with lots of 
opportunities for good products and services.
    There is no question that since last September, after the 
retail banking sales issues were announced, there was an impact 
on our business. But since then, because of the changes, 
fundamental changes that we have made in the company, we are 
continuing to grow. We are not growing as fast as we were prior 
to last September, but we are on a good trajectory. And, again, 
I think that is because we have taken responsibility, we have 
taken executive responsibility, we have made changes, we have 
made changes in our products and services and our processes, 
and our customers are seeing that and they are reacting 
positively to that. We are not where we need to be, but we are 
making progress.
    Senator Cotton. OK. One of the things that has always 
seemed peculiar to me about the controversy over the fake 
accounts is how few of them produced any revenue, so it is not 
just that they were fake, but Wells Fargo sales incentives 
apparently were rewarding employees for accounts that did not 
produce revenue and the client did not even know about. That 
seems like some misaligned incentives.
    Mr. Sloan. Oh, I think it was----
    Senator Cotton. Not even effective at cheating the system.
    Mr. Sloan. I think it was worse than misalignment. I think 
it was stupid.
    Senator Cotton. Yeah. What were the incentives? I mean, if 
you are not even producing revenues from these accounts, why 
were they created in that way?
    Mr. Sloan. Our retail banking business was focused on 
growing the number of accounts. They were too focused on 
growing the number of accounts and incented people for just 
doing that as opposed to good products and services, growing 
relationships, doing it in the right way. In hindsight, it was 
just stupid.
    Senator Cotton. So you have been on board now for a good 
bit of time to try to clean up everything. What do you think is 
the risk of possible other misaligned incentives inside the 
organization of which you are not yet aware?
    Mr. Sloan. Well, Senator, I think it is relatively low. 
Again, I cannot promise perfection, but I have told our team we 
need to get as near to it as we can. And so what we have done 
is, you know, as part of our agreements with our regulators, 
they appropriately said, ``Hey, as part of these consent 
orders, you need to look at the incentive compensation 
structures across a number of your products.'' As CEO, I said, 
``No, we are going to go beyond that.'' We are going to look at 
the incentive compensation system throughout the entire 
company, and we are not just going to do it ourselves. We are 
going to bring in third parties to do it independently and give 
reports not only to senior management but give those reports to 
our regulators and give those reports to our board so that we 
are very transparent about it. And I am pleased that they have 
not found anything as serious as what we--but we cannot rest. 
We can never let something like this happen again.
    Senator Cotton. I would agree with that.
    Finally, I just want to make a point. We have heard a lot 
about forced arbitration this morning in this conversation. 
This is in reference to the Consumer Financial Protection 
Bureau's new arbitration rule. I would say if we allow that 
rule to go into effect, we may not have forced arbitration but 
we will have forced class action lawsuits, because without 
arbitration as an option, then the arbitration system will 
essentially cease to exist. And I do not think we should be 
forcing consumers to fund the lawsuits of class action lawyers.
    Chairman Crapo. Senator Donnelly.
    Senator Donnelly. Thank you, Mr. Chairman.
    Mr. Sloan, you just mentioned that the buck stops with you 
and that you are going to make it right by American customers 
and American employees. I am concerned by the outsourcing of 
call center jobs, and I have learned that Wells Fargo has 
eliminated several hundred jobs here in this country recently 
and more in recent years. At the same time that you were 
letting these people go, you were adding on positions in the 
Philippines.
    How is that making it right by your people here that work 
for Wells Fargo?
    Mr. Sloan. Senator, we employ 270,000 team members. About 
more than 90 percent are here in the U.S., and the reason for 
that is that that is where most of our business is done, in the 
U.S. About 95 percent of our revenues, our customers, are here.
    We hire anywhere between 40,000 and 50,000 people here in 
the U.S., and currently we have 15,000 jobs that are open in 
the U.S. For example, in our retail banking business, since 
September of last year, since I became CEO, more or less, we 
have hired about 17,000 people. They are all here in the U.S.
    Senator Donnelly. Well, let me ask you this: Did you let 
people go that were working in the call center areas and add 
people in the Philippines to the same positions?
    Mr. Sloan. Senator, we want to make sure that we are 
providing our products and services----
    Senator Donnelly. Well, that is an easy one. Did you let 
people go here in the States and then add people in the 
Philippines?
    Mr. Sloan. Senator, we did, and generally our track record 
is that we rehire somewhere between 70 and 80 percent of each 
of those folks into another job in Wells Fargo. They generally 
get a preferential treatment and review because we have--we 
always have about 15,000 jobs that are open.
    Senator Donnelly. What happened to the other 20 percent?
    Mr. Sloan. Senator, I do not know exact----
    Senator Donnelly. Would you make a commitment to figure out 
how you can get them back on the team?
    Mr. Sloan. Senator, I will make a commitment that we want 
to hire as many qualified team members as we can, because we 
have 15,000 jobs that are open right now.
    Senator Donnelly. Every business wants to do that. What I 
am asking you is for those 20 percent that you talked about 
that may have been let go but not rehired, you know, if it is 
not for various other reasons--I mean, if they were doing their 
job right, would you commit to rehiring them in another 
position?
    Mr. Sloan. If we have jobs that are open that they are 
qualified for, of course, I will commit to that.
    Senator Donnelly. Well, why would you in the first place 
send these jobs to the Philippines if they were being done 
here?
    Mr. Sloan. Because frequently, when we look at how to best 
serve our customers, it makes sense to have folks around the 
world so that we can continue to be working through a 24-hour 
day and not run a night shift, for example, somewhere. We think 
that that is an effective way to do----
    Senator Donnelly. Do you think Americans are not capable of 
working a night shift?
    Mr. Sloan. No.
    Senator Donnelly. I can show you a whole bunch of folks in 
my State who work night shifts.
    Mr. Sloan. Senator, I do not mean to be critical of anybody 
that works a night shift at all. But I am just saying that in 
terms of how to efficiently and effectively run our business, 
we want to make sure our people are in the right place.
    Again, Senator, we have over 250,000 team members that 
are----
    Senator Donnelly. I got that. I guess----
    Mr. Sloan. ----here in the U.S. We love doing business in 
this country.
    Senator Donnelly. I guess what I would say to you is if the 
buck stops with you, I may be patriotic, I may be a flag waver, 
and I stand guilty of both of those. But I would put your folks 
who are working in those jobs up against anybody anywhere else 
in the world.
    Now I just want to ask you about something else. In 2013, 
you said that you sat on the Operating Committee, and you saw 
problems and you were concerned. And it was around 2015 Mr. 
Stumpf came to my office and was extolling the culture of the 
company. And I do not want to hold it to an exact date because 
it is 2015, 2016. If you were concerned in 2013, why didn't you 
stop it?
    Mr. Sloan. Senator, we did take efforts to address the 
issues, but in hindsight----
    Senator Donnelly. Did you know there were fake accounts in 
2013?
    Mr. Sloan. No, I did not. Not in 2013. And we should have 
and could have taken more aggressive action. For example, I 
think in hindsight, what we should have done is not ended that 
incentive compensation plan in our retail bank in the third 
quarter of last year. We should have ended it years earlier. We 
tried to deal with the issue, but we dealt with the issue 
incrementally. We did not deal with the issue comprehensively. 
And for that we take responsibility.
    Senator Donnelly. When you saw that in 2013, and you said, 
``We have got problems here, this is not working,'' did you 
mention that to the board? Did you tell them that, ``We have 
got problems,'' that things are not the way they--the things 
that you see are not the way they really are?
    Mr. Sloan. Senator, my recollection, which is consistent 
with the report of the independent investigation that the board 
did, is that those were escalated to the board in 2014 and 
2015. I think that is another area where management should have 
escalated that more quickly.
    Senator Donnelly. Did you escalate that to the board at 
that time, saying, ``Hey, look, this is way out of control''?
    Mr. Sloan. It was escalated by a number of senior leaders.
    Senator Donnelly. And the board chose not to take action?
    Mr. Sloan. The board was overseeing the actions that we 
were taking. We represented that we thought that they would 
address the issues. Again, Senator, in hindsight, we were 
wrong. And it lessened the issue so that the number of 
accounts, the number of team members impacted was declining. 
But that is not how we should have dealt with the issue. The 
way we should have dealt with the issue is to end it 
permanently, and we did not deal with that in our Community 
Bank until we ended the incentive compensation plan and changed 
management last year. That was a mistake on our part, and it 
will not happen again.
    Senator Donnelly. Thank you, Mr. Chairman.
    Chairman Crapo. Thank you.
    Two Senators have asked for a second round, and so we will 
do that. We do have a few minutes left. Senator Brown and 
Senator Warren have asked for a second round. I may choose to 
do one myself. But let us go to you, Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    In my opening, Mr. Sloan, I talked about Mr. Stumpf's 
testimony last year that this activity was limited to the 
Community Banking Division. The company, pure and simple, lied 
to this Committee and lied to the public. The company recently 
disclosed it knew in July 2016 that customers had auto 
insurance policies added to their auto loans without their 
consent--about 800,000 customers, roughly the size of the State 
that Senator Rounds represents.
    Every day since you have become the head of Wells Fargo for 
the last 11 months, every day you have made a decision to not 
disclose this information to the public. Your company knew 
about the auto insurance policy when former CEO Mr. Stumpf 
testified. When did you first become aware of the force-placed 
auto insurance policy problem? And why did you think it was OK 
to continue covering it up?
    Mr. Sloan. Well, I do not think it was OK to cover it up, 
Senator Brown. In fact, when the issue was escalated to me in 
2016, in late August, early September, I talked to our team 
about it, and we decided at that point in time to end and tell 
our vendor to quit providing that insurance to our customers. 
And that was effective at the end of September.
    We then created an internal group made up of business line 
experts, legal experts, our auditing function to look at the 
matter. We brought in an independent law firm and an 
independent consulting firm to help us do a comprehensive and 
third-party review of the remediation. We got the results of 
their report in the first quarter of last year. We began to put 
together the remediation plan, and we disclosed that 
remediation plan in August. And we highlighted that--we 
disclosed the issue in August. We have described what our 
remediation plan is as it relates to those 570,000 customers. 
Those checks have begun to go out, and we reported that in our 
second quarter 10-Q. So we have not been covering it up.
    Senator Brown. Well, you did not cover it up----
    Mr. Sloan. I am sorry, Senator. Could I make one other 
point? We disclosed that to our regulators in the third quarter 
of last year also.
    Senator Brown. But that it took you, you the company--you 
personally 8 months, you the company 13 months to disclose such 
a violation of the public trust just makes me incredulous.
    Let me move to something else. You have said several times 
that arbitration is better for consumers. How have consumers 
fared in arbitration with Wells on the average?
    Mr. Sloan. I do not have the answer to that, Senator.
    Senator Brown. Well, I do, and I am surprised you do not. 
On average, the CFPB found consumers paid $7,700 in arbitration 
overall, in arbitration cases. Other data says that Wells 
customers paid $11,000 on the average. So they brought you to 
arbitration--or you brought them to arbitration. On the average 
consumers do not do very well in arbitration, suggesting that 
there is something wrong, and also suggesting that arbitration 
seems to work out well for Wells Fargo, not so well for your 
customers. So it is pretty troubling that you continue to dig 
in and say arbitration is better for customers because it 
clearly is not.
    Let me ask one----
    Mr. Sloan. Senator, could I give you an example of how we 
are changing the company to address those----
    Senator Brown. In 20 seconds, because I want to respect the 
Chairman's 5-minute----
    Mr. Sloan. Absolutely. Senator, one of the issues that we 
disclosed in the 10-Q was rate lock, rate lock extension fees 
for our customers. We are not waiting for our customers to want 
to arbitrate. What we are doing is we have said that--and I 
want to make this very clear because this is going to come out 
in the next couple of days, so I might as well mention it in 
front of you all, and that is, we are going to our customers, 
and we are saying the following: ``If you have a complaint 
about a rate lock extension fee that you paid at Wells Fargo, 
we will remediate it.''
    Senator Brown. Good, and----
    Mr. Sloan. We are going to contact 108,000 customers, and 
we are going to say the following----
    Senator Brown. There are some good things you are doing. I 
am not saying you are not. But I am saying that on fundamental 
issues like continuing--Senator Cotton talked about for 
whatever, but he said optional. We are saying it is forced 
arbitration. It is not optional for so many of your customers.
    Last point, right before the scandal broke, CEO 
compensation at Wells Fargo increased from $19 to $21 million. 
You recently announced you will be increasing the minimum pay 
for tellers from $12 to $13.50 an hour.
    Mr. Sloan. $13.50 to $17.10 an hour, depending upon where 
they are located. That is a 12-percent increase, and it is 80 
percent above the Federal minimum wage.
    Senator Brown. Well, the Federal minimum wage is poverty 
wages plus. So the CEO was overseeing a mass fraud. He gets a 
compensation increase from $19 to $21 million a year, and 
tellers get a raise, making those tellers still eligible for 
taxpayer subsidies to subsidize your employees, subsidies of 
Medicaid and food stamps and Section 8 housing, perhaps in the 
EITC. I mean, you fight class action from employees that you 
did not pay overtime. It just strikes us as hypocritical to be 
boasting about this minor increase. It matters to them. It does 
matter to them.
    Mr. Sloan. It does matter to them, Senator, and I think 
that is one of the reasons why----
    Senator Brown. But you defend--you defend wage theft--your 
company is defending wage theft in court by fighting these 
overtime claims by your employees.
    Mr. Sloan. Senator, I am very proud of the fact that we 
raised the base pay for our lowest-paid team members. I think 
that is one of the reasons why our attrition has gone down, 
because what they are saying is that we are paying them fairly.
    In addition to the base pay, we provide a benefits package 
to those team members that averages between $6,000 and $8,000. 
We provide other benefits to them. What we are seeing is a team 
member base, particularly at the lower levels, that is very 
happy to work at Wells Fargo. And you have my commitment to 
continuing to make sure that those team members are paid in an 
appropriate way.
    Chairman Crapo. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    Mr. Sloan, since becoming CEO, you have said that your 
priority is rebuilding trust with your employees. At a company-
wide meeting this past March, you told your employees, and I 
want to quote you: ``Wells Fargo's mission has never been just 
about improving our bottom line.'' And then you went on to 
assure them that Wells Fargo's employees were the most 
important and valuable resource. Is that right?
    Mr. Sloan. Yes. I say that often, Senator.
    Senator Warren. Good. So 2 months after making those 
comments to your employees, you held an investor day where you 
and your team made your pitch to Wall Street investors, and you 
rolled out a new financial plan, and I would like to submit a 
copy of that plan for the record, if I may, Mr. Chairman.
    Chairman Crapo. Without objection.
    Senator Warren. Thank you.
    Now, I am sure you are familiar with this presentation, Mr. 
Sloan. I have also given you a copy of it, too. On pages 26 and 
27 of this presentation, you say that Wells Fargo will cut $4 
billion in expenses--$2 billion by the end of 2018, another $2 
billion by the end of 2019. That is a huge cut, an 8-percent 
reduction in non-interest expenses over just a 2-year period.
    Now, here are some of the ways you describe how you are 
going to achieve those cuts----
    Mr. Sloan. I am sorry, Senator. Could I just correct one 
thing you said?
    Senator Warren. Yes.
    Mr. Sloan. So it is not over a 2-year period. It is over 
about a 4-year period. That is number one.
    Number two, what we have said is that the first $2 billion 
that we are going to be reducing, we are going to reinvest back 
into the business, so it is not going to the bottom line for 
our shareholders. As it relates----
    Senator Warren. Actually, let me just quote what you said 
to the investors.
    Mr. Sloan. Sure.
    Senator Warren. You said you were going to consolidate--
consolidating similar operations activities to provide better 
economies of scale----
    Mr. Sloan. So that Center of Excellence----
    Senator Warren. ----improving--can I just read this, 
please?
    Mr. Sloan. Sure. I am sorry.
    Senator Warren. Improving processes, including digital 
technology to automate manual processes, and outsourcing of 
certain non-differentiated capabilities.
    Now, that is a lot of corporate buzz words, but 
consolidating, automating, and outsourcing sounds an awful lot 
like firing people. So, Mr. Sloan, given your statements about 
how much you value your employees, can you tell us today that 
you will not be firing any employees as part of this $4 billion 
cut?
    Mr. Sloan. I cannot.
    Senator Warren. OK.
    Mr. Sloan. And the reason for that is, Senator, we have an 
obligation to run Wells Fargo----
    Senator Warren. That is all I need--that is all I need to 
know, because when I look at the numbers, it looks like to me 
you are going to end up firing tens of thousands of employees 
to be able to make these numbers. Compensation----
    Mr. Sloan. Senator, Senator----
    Senator Warren. ----and benefits for employees by far are 
Wells Fargo's biggest expense.
    Mr. Sloan. That is about 60 percent of our total expenses, 
and we are proud of that, by the way, because----
    Senator Warren. And if we assume an 8-percent cut in those 
expenses, that means that you would fire more than 20,000 
employees in the next few years. And here is the kicker for me, 
Mr. Sloan. After telling your employees in March that they were 
your most valuable resource and that Wells Fargo has ``never 
been just about improving our bottom line,'' I want to read you 
what Wells Fargo told Wall Street investors 2 months later, in 
May: ``We expect an additional $2 billion in annual expense 
reductions by the end of 2019. These savings are projected to 
go to the bottom line.''
    Mr. Sloan. That is correct. That is what I just said.
    Senator Warren. So you are literally telling Wall Street 
you are going to fire thousands of employees----
    Mr. Sloan. No, we did not say that.
    Senator Warren. ----off the bottom line.
    Mr. Sloan. Senator, Senator, you are using math to then----
    Senator Warren. Yeah, I do use math.
    Mr. Sloan. Yeah, but you are using math inappropriately, 
Senator. That is not----
    Senator Warren. Inappropriately, by adding numbers?
    Mr. Sloan. No; you multiplied two different numbers----
    Senator Warren. I realize----
    Mr. Sloan. ----and you applied it to people.
    Senator Warren. ----different way that that kind of thing--
--
    Mr. Sloan. No. Senator, you----
    Senator Warren. ----works at Wells Fargo.
    Mr. Sloan. You applied it to people.
    Senator Warren. I asked you, can you say you are not going 
to make these cuts by firing people? And you were very direct. 
You said no, you cannot make that promise.
    Mr. Sloan. I have a responsibility to the 270,000 team 
members to make sure that the company is in existence and 
successful----
    Senator Warren. So let us talk about----
    Mr. Sloan. ----year after year after year.
    Senator Warren. ----that then. I have got one more thing I 
would like to read from you, and that is, it is clear that you 
are going to knock out a lot of employees here, and it gets 
worse. At the same time you are planning to fire employees, you 
are promising to spend $11.5 billion in the next year buying 
back Wells Fargo stock. You have made this public announcement. 
You have that much extra money.
    So, look, if you stick to your current plan, it is clear 
that Wells Fargo employees making $30,000 or $40,000 a year are 
going to get screwed, just like they got screwed in the fake 
accounts scandal before. It was executives who demanded new 
accounts be produced at all costs. But it was 5,300 front-line 
employees who paid for that with their jobs. And now that the 
fake account scandal has tanked Wells Fargo's reputation, your 
way of pumping up the bottom line and keeping Wall Street 
investors happy is to slash costs by firing low-level 
employees.
    You know, what happens in these cases, Mr. Chairman, is in 
these corporate scandals it is almost always the front-line 
workers who pay the price, not the executives. And the only way 
we are ever going to stop these scandals is to hold executives 
personally accountable, to fire the people who are responsible, 
and when they break the law, to march some of them out in 
handcuffs. And until we do that, these scandals are going to 
continue and working people are going to continue to take the 
brunt of it.
    Thank you, Mr. Chairman.
    Chairman Crapo. Thank you, Senator Warren.
    Mr. Sloan. Senator, could I respond to that?
    Chairman Crapo. Yes. As a matter of fact, I am going to 
take my last word as the last questioning period here. I am 
interested in what your answer would be to Senator Warren's 
statements and the assertions that she makes.
    Mr. Sloan. Yeah, well, I could not disagree more with 
almost everything that Senator Warren said. I think it is 
inappropriate to take various statements out of context and 
multiply numbers and then apply them to people, because then 
what you are saying, you are scaring people, and that is 
inappropriate.
    When you look at Wells Fargo, I have said first and 
foremost my commitment is to our 270,000 team members, to make 
sure that they have got a safe place to do business in, to 
serve their customers, that they are paid fairly, and what 
those team members are saying to us, even in the midst of the 
fact that we have said that we need to become a more efficient 
organization, is they like working at the company, because our 
attrition is down. It is down to its lowest levels in years, 
and that is because they appreciate the fundamental changes 
that we have made, many of which but not all of which we have 
talked about.
    We care about our team members. That is why I spend a lot 
of my time going out and seeing them and talking to them and 
understanding how they are feeling about the company. And we 
are making changes based upon what they tell us. Every other 
month I hold a town hall with one, two, three thousand team 
members and ask them, unscripted, to give us suggestions. We 
have implemented lots of their suggestions. We care about them.
    But at the same time, I have an obligation as the CEO of 
this company to make sure that we keep other stakeholders 
happy, and that includes our shareholders, who are not just 
Wall Street investors, but they are shareholders that are 
pension funds that support many retirees all across this 
company. 401(k) plans own our stock. We have got an obligation 
to them.
    So my job as CEO is to try to balance those appropriately, 
and I am working as hard as I can to accomplish that.
    Chairman Crapo. All right. Well, thank you. And I want to 
just let our Senators know that if they have additional 
questions, they are due by next Tuesday. And then, Mr. Sloan, 
we generally ask that the witnesses respond to those questions 
as quickly as they can. Not knowing how extensive those 
questions will be, we cannot give a specific timeline to that. 
But we would like----
    Mr. Sloan. Senator, if you want to set a deadline for us 
right now, we would be happy to live up to whatever deadline 
you would like to set.
    Chairman Crapo. We generally ask that the questions be 
responded to in 1 week from when they are received.
    Mr. Sloan. We will respond in 1 week.
    Chairman Crapo. All right. Without anything further then, 
this hearing is adjourned.
    Mr. Sloan. Thank you.
    [Whereupon, at 11:58 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
                 PREPARED STATEMENT OF TIMOTHY J. SLOAN
      Chief Executive Officer and President, Wells Fargo & Company
                            October 3, 2017
    Chairman Crapo, Ranking Member Brown, and Members of the Committee, 
thank you for your invitation to today's hearing, ``Wells Fargo: One 
Year Later''. I appreciate the opportunity to discuss the progress 
Wells Fargo has made.
    The past year has been a time of great disappointment and 
transition at Wells Fargo because we recognized too late the full scope 
and seriousness of the problems in our Community Bank. When my 
predecessor testified here last year, we had not fully grappled with 
the damage the sales practices scandal had done to our customers, our 
team members, and their trust in the bank. We came to Congress without 
a good plan and all of you were right to criticize us. But I heard 
you--and I heard our customers and our team members--loud and clear. 
You expect us to do better, and so do we.
    So let me be very clear about this: I am deeply sorry for letting 
down our customers and team members. I apologize for the damage done to 
all the people who work and bank at this important American 
institution. When the challenges at Wells Fargo demanded decisive 
action, the bank's leaders acted too slowly and too incrementally. That 
was unacceptable.
    I also want to be clear about another thing: Wells Fargo is a 
better bank today than it was a year ago. And next year, Wells Fargo 
will be a better bank than it is today. That is because we have spent 
the past year determined to earn back the public's trust. Since I 
became CEO 11 months ago, my team and I have been focused on the three 
tasks you have invited me to discuss today.
    First, in response to the sales practices problems announced in 
2016, we are transforming our Community Bank. Our retail bank has 
strong new leadership, more effective organization, and incentives that 
reward our team members for doing what is right for the customer. This 
is a fundamentally different organization from the one that existed in 
2016.
    Second, we are looking beyond our Community Bank to review our 
operations across the entire company, including in our indirect auto 
lending business. That review is still in progress, but it has already 
identified several ways in which we can improve. I am committed to 
confronting these problems head-on, and fixing them.
    Third, we are working diligently to make things right for every 
customer who was harmed by any of our practices and, to that end, we 
will compensate every customer who suffered because Wells Fargo made 
mistakes. I am pleased to report that these remediation efforts are 
well underway.
Transforming Our Community Bank
    No part of our company better reflects the difference between Wells 
Fargo in 2016 and Wells Fargo in 2017 than our Community Bank. We have 
dramatically overhauled its leadership, its organization, and its 
incentives. At every level of the bank, our efforts focus squarely on 
the needs of our customers, not on achieving product sales goals.
    I appointed a new leader, Mary Mack, to transform the Community 
Bank. Mary has worked tirelessly to improve our approach to meeting 
customer and team-member needs.
    Together, we have eliminated product sales goals for retail 
bankers. Those goals contributed to a high-pressure sales environment 
that failed our customers. In some cases, these goals even resulted in 
customers receiving products they never requested or realized they had.
    In addition, we have made dramatic changes in the way our team 
members interact with our customers by adopting a new customer-service 
approach across our Community Bank. We have simplified complicated 
processes, replaced required questions with relevant tips, and enabled 
bankers and tellers to better meet their customers' needs by offering 
them the right products, services, or referral. Managers have also been 
empowered to immediately resolve some customer issues, like fees, at 
the branch rather than through a call center. These changes have led to 
a more personalized experience for our customers and more fulfilling 
jobs for our team members.
    We are equally committed to the former Wells Fargo team members who 
were affected by the Community Bank's old ways of doing things. I am 
proud to report that since last September we have hired back more than 
1,780 team members who left the bank during those years.
    I have also now made clear that, when team members have concerns, I 
want to know. I have traveled the country, visiting more than 100 
offices, to meet personally with thousands of team members. Our senior 
leadership team has done the same. We have also improved our ethics 
protections to ensure that every team member feels empowered to speak 
up without any fear of retaliation when he or she sees a problem.
Accountability
    I know that responsibility for Wells Fargo's shortcomings reaches 
well beyond our bank branches. That is why our review and our changes 
have not stopped there. We started by holding executives accountable. 
Over the past year, Wells Fargo eliminated a record $180 million in 
senior-executive compensation:

    No member of the Operating Committee who served before 
        September 8, 2016, including me, received a bonus for 2016.

    Every member of the Operating Committee who served before 
        September 8, 2016, had his or her long-term incentive awards 
        for past performance reduced by up to 50 percent.

    Neither former CEO John Stumpf nor former head of the 
        Community Bank, Carrie Tolstedt, received a bonus for 2016.

    Mr. Stumpf forfeited $69 million in compensation and 
        equity.

    Ms. Tolstedt forfeited $67 million in compensation and 
        equity.

    And, finally, we terminated four senior leaders of the Community 
Bank, which cost them their 2016 bonuses, their unvested equity awards, 
and their vested outstanding stock options.

    Looking forward, we have made oversight and compliance much more 
effective than a year ago. These are fundamental changes to the way the 
company runs. We have reviewed and adjusted the roles of tens of 
thousands of our team members. We have moved away from a decentralized 
``Run It Like You Own It'' structure, where business leaders had the 
discretion to run their operations independently. Now we follow a more 
centralized model in which risk, compliance, and human resources 
leaders have far greater visibility into, and accountability for, 
issues across the individual business lines. In addition, I established 
a Conduct Management Office with company-wide responsibility for 
investigations and complaints. This new team assesses complaints across 
the company, reports every month to our executive team--including me--
and helps leaders ``connect the dots'' in ways we never could before. 
Now when a problem emerges, we can identify it quickly, escalate it 
promptly, and address it fully.
    These changes are consistent with, and designed to address, the 
findings of our Board's independent investigation into the root causes 
of our retail sales practices issues. That investigation found, and I 
agree, that our previous structure contributed to a failure to see the 
threat that high-pressure sales goals posed to our Community Bank and 
our customers. This structure also contributed to our slow and 
insufficient response to that threat. My job as CEO is to ensure that 
never happens again.
    One important way I have exercised that responsibility is by 
calling for a comprehensive review of sales practices and other 
customer-facing operations across the bank. We decided to go beyond the 
requirements of our regulators and conduct a company-wide review, 
leaving no stone unturned.
    That review has consumed a big portion of the past year and 
continues today. This has been, and continues to be, a massive 
undertaking. It has involved our own team members, as well as 
regulators, independent directors, lawyers, and independent 
consultants. The mandate is to identify any failures or practices that 
could harm our customers.
    We expected to find more shortcomings through this effort, and we 
did. You have undoubtedly heard about some of these problems in the 
news. Last fall, were viewed 93 million accounts opened between 2011 
and 2015. That review raised concerns regarding whether approximately 2 
million accounts had been properly opened. We told you and others that 
we would look at even more accounts, and we did. We searched across 
2009, 2010, and 2016--nearly doubling the time frame to eight years. We 
also looked at other types of accounts or services, such as online bill 
pay, that may have been initiated improperly.
    In August, we announced the result of this broader look at 165 
million accounts opened between 2009 and 2016. Our estimate of 
potentially unauthorized accounts grew by about 1.5 million. This is a 
substantial number, but it is important to note that these are not 
``new'' instances of possible misconduct since last fall; they are 
newly revealed instances of possible misconduct based upon our own 
expanded investigation of the years before 2017. Of the total of 3.5 
million accounts, approximately 190,000 incurred fees and charges. 
Wells Fargo will provide a total of $2.8 million in additional refunds 
and credits on top of the $3.3 million previously refunded as a result 
of the original account review. Our commitment is to refund all fees 
and all charges imposed with respect to any accounts and services that 
proved to be unauthorized.
    During the past year, we also confronted problems in our auto-loan 
business. We explained in August that some of our auto loans involved 
insurance that had been placed by a vendor when the customer was 
already insured. This issue is quite different from the previous sales-
practices issues in our Community Bank, because this insurance was not 
a product that Wells Fargo team members were given an incentive to 
sell. Also, this is an issue we found and addressed ourselves. The 
improper insurance charges occurred because of flaws in our process for 
verifying the customer's insurance status and disclosing the premiums 
added. It was a significant mistake that harmed a lot of people, and we 
are making it right. Last month, we began issuing checks to affected 
auto-loan customers, all of whom we expect to reimburse by the middle 
of 2018.
Making Things Right With Our Customers
    The entire Wells Fargo team, all 270,000 of us, is committed to 
making things right for customers the bank let down. This is a big job, 
and we will get it right.
    To ensure our changes to the Community Bank are working for our 
customers, we dramatically enhanced our monitoring and compliance. As 
an example, we are closely monitoring the opening of new accounts. 
Every new account now generates an email within an hour, or a letter 
within a day, to confirm the account holder's authorization. In our 
branches, we are on pace to conduct 16,000 visits by ``mystery 
shoppers'' this year, so that these anonymous reviewers can test and 
examine the practices and service that our customers experience. These 
visits will help ensure we are proactively identifying any improper 
sales practices and delivering customer service that is consistent with 
our mission.
    We also are reaching out to customers all across America to 
determine if they were affected by the bank's practices and, if so, how 
we can fix it. During the fourth quarter of 2016, we contacted more 
than 43 million individual and small business customers. We are issuing 
refunds to every affected customer who has responded or has been 
identified by our third-party review. Wells Fargo has already paid 
millions in refunds and credits to Community Bank customers we spoke 
with between September 2016 and July 2017. In addition, customers 
harmed by our discontinued sales practices will receive a total of $142 
million in compensation (after deducting plaintiffs' attorneys' fees 
and administration costs) under our class-action settlement. This will 
compensate customers for claims dating back to 2002, including claims 
by customers for increased borrowing costs resulting from credit-score 
impact.
    Beyond these formal reimbursement mechanisms, I want to be clear 
that Wells Fargo is committed to addressing every concern any customer 
may have about an unwanted product or service--no matter where or when 
it may have occurred.
    The past year has been humbling and challenging. We are resolving 
past problems even as we make changes to ensure nothing like this 
happens again at Wells Fargo. We are doing this by strengthening our 
culture, holding leaders accountable, and improving our business 
practices and risk management. I want to thank all our team members for 
their hard work in this transformation.
    Together, we will do whatever is necessary to put our customers 
first. I see the improvement every day, and so do the team members I 
visit in our bank branches. I think our customers have noticed the 
improvement, too. I pledge to you that we will not stop until we 
restore our reputation and our customers' trust, and make Wells Fargo 
the finest and most ethical company it can be.
    Thank you again for the opportunity to address this Committee. I 
look forward to your questions.




             RESPONSES TO WRITTEN QUESTIONS OF THE
         SENATE BANKING COMMITTEE FROM TIMOTHY J. SLOAN
         
         
         
         
         
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