How do you think the scandal has affected Wells Fargo's reputation?
The bank said that as of Friday, it has paid $3.2 million in refunds to customers from 2011 to 2016.
Wells Fargo & Co. acknowledged on Friday that its fraudulent customer-account scandal dates back nearly 15 years to May 2002.
As a result, the bank has agreed to pay an additional $32 million - for a total of $142 million - as part of the class-action settlement it announced March 28 in the U.S. District Court for the Northern District of California. Attorney fees will be deducted from the amount.
"The expansion of this agreement is another important step to make things right for our customers," Tim Sloan, Wells Fargo's president and chief executive, said in a statement.
"On our journey to rebuild trust, we want to ensure our customers feel confident that we have heard their concerns about retail sales practices, which includes offering them numerous opportunities for remediation," Sloan said.
Chris Marinac, the managing principal of FIG Partners LLC of Atlanta, a financial services firm, said the enhanced settlement "is not a large figure relative to its earnings stream."
But, Marinac added, "It is a wise decision to move forward and put (the scandal) behind the company."
The increased settlement amount is on top of the $185 million the bank agreed Sept. 8 to pay to resolve regulatory complaints about 1.5 million potentially fraudulent customer checking and 623,000 credit-card accounts.
The accounts were opened by branch employees and managers in customers' names, primarily in the Los Angeles and Arizona markets.
However, the bank has said it cannot rule out that 38,722 unauthorized customer accounts were established in North Carolina and 23,327 in South Carolina.
Ironing out problems
The bank said it is "working directly with customers to resolve issues through its complaints process," or through a free mediation process that some consumer advocates have criticized for limiting customers' reimbursement potential.
The bank said the expanded settlement agreement represents a ripple effect from the investigation of its retail sales practices by its independent board members, which was released April 10.
The settlement class now consists of all customers "who claim that Wells Fargo opened an account in their name without consent, enrolled them in a product or service without consent, or submitted an application for a product or service in their name without consent during the period from May 1, 2002, through April 20, 2017."
Wells Fargo said it expects the settlement in the Northern District of California to resolve claims in 11 other pending class-action lawsuits.
The bank said the reimbursement will cover three retail sales practices:
Fees incurred because of fraudulently opened accounts.Compensation for damage to customers' credit.Additional compensation paid from the net settlement fund.
The bank said that as of Friday, it has paid $3.2 million in refunds to customers under the stipulated judgment with the Los Angeles city attorney, the federal Consumer Financial Protection Bureau and the U.S. Office of the Comptroller of the Currency for 2011 to 2016. The bank is reviewing account activities in 2009 and 2010 to determine whether there were additional damages in those years.
'Run it like you own it'
The board's investigation determined that the bank's decentralized "run it like you own it" attitude toward its community banking unit was at the root of the scandal that significantly stained the bank's once-sterling reputation.
The board determined that an insular community banking division, led by Carrie Tolstedt, and top executives' devotion to aggressive customer cross-selling practices formed the culture that enabled the practices to take root. For decades, the community banking unit operated in a decentralized system, with limited oversight from senior executives.
With the report, the board officially put the bulk of the blame on Tolstedt, who was described retroactively as fired with cause, and John Stumpf, who retired as chairman and chief executive in October.
The board said the bank's "decentralized corporate structure gave too much authority and autonomy to the community bank's senior leadership without the necessary oversight and encouraged deference to the business units."
The board increased the amount of executive compensation clawbacks from Stumpf and Tolstedt by an additional $75 million. The total executive compensation clawback has risen to more than $180 million.
The board has faced significant investor and analytic criticism for its handling of the scandal, including calls for some, if not a majority, of the members to resign or be rejected by shareholders at Tuesday's 2017 shareholder meeting.
Cathy Seifert, an analyst with CFRA Research, has criticized the bank's overall handling of the scandal.
Seifert said Friday that the acknowledgement that the fraudulent retail sales practices dates back to 2002 overshadows the additional settlement amount and "is the more troubling news."
"Despite the benefits of a rising rate environment, we would not add to positions," she said.
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