Sales quotas dropped at Wells Fargo after $185m penalty
Following its agreement with regulators to pay $185m in penalty fines for its illegal sales practices, Wells Fargo has eliminated high sales quotas for its employees. Over 5,000 employees were fired after around 1.5 million deposit accounts and 565,000 credit card accounts were opened without customers’ consent in a bid to fulfil a sales target of 20 financial products per day. The unauthorised accounts were discovered in 2013 through a Los Angeles Times investigation. The bank’s penalty is the largest leveraged against a financial institution by the Consumer Financial Protection Bureau.

Wells Fargo will eliminate sales goals for all of its retail banking products by January, the bank announced on Tuesday. The decision comes less than a week after the largest US bank reached a deal with regulators and agreed to pay $185m in penalties for its illegal sales practices.

More than 5,000 employees were fired by Wells Fargo after an investigation revealed that they were opening deposit and credit card accounts without permission from its customers in order to meet sales quotas enforced by the bank. According to regulators, as many as 1.5m deposit accounts and 565,000 credit card accounts could have been opened without customers’ consent.

“We are doing this because we want our customer to have full confidence that we are focused on their best interests. We deeply regret what happened and we are committed to making it right,” Richele J Messick, a Wells Fargo spokeswoman, said in an email.

As part of the settlement, Wells Fargo agreed to hire a consultant to review its sales practices and refund the fees paid by consumers on the accounts that were opened without their permission. So far, customers have been refunded $2.6m in unwarranted fees. According to the bank, “accounts refunded represented a fraction of 1% of the accounts reviewed, and refunds averaged $25”.

The issue of unauthorized duplicate accounts was first reported by the Los Angeles Times in 2013. At that time, a personal banker working at Wells Fargo was expected to sell 20 products a day.

“I am not sure how that’s possible within an eight-hour day of work. Pretty much every customer takes an hour,” Khalid Taha, a former Wells Fargo employee, told the Guardian in 2015. “[In 2014], the sales goal dropped to 15 products a day, which is still unreasonable. You don’t sell more than a product per customer. You can, but it’s not that easy. And most of our customers are current customers. They already have several products.”

Some employees – including Taha – have previously attempted to draw attention to the issue by staging a protest in front of the bank’s headquarters in Minneapolis.

About 5,300 employees were fired over a five-year period. Richard Cordray, the director of the Consumer Financial Protection Bureau which levied a $100m penalty on Wells Fargo, said it was not a coincidence that so many employees were involved.

“It’s a systemic breakdown,” he said in an interview with CNBC. “Obviously employees were sharing information with one another. They were doing things together. And 5,300 or more of them have now been fired. That was a huge problem. It should not occur at any bank. And it should not have occurred at Wells Fargo.”

Cordray pointed out that this is the largest penalty levied by CFPB so far. He added that while there is no indication that this is happening at other banks, all banks with incentive programs should monitor them closely. The Wells Fargo settlement is a “loud and serious warning” to other banks, he said.

In a statement announcing the elimination of sales quotas, Wells Fargo chief executive John Stumpf noted that the bank has strengthened its “control and oversight” over the past several years.

“The elimination of product sales goals represents another step to reinforce our service culture, helps ensure that nothing gets in the way of our ability to achieve our mission, and is consistent with our commitment to providing a great place to work,” said Stumpf.