Charles Scharf became chief executive of Wells Fargo in October 2019, the third to hold the job since the fake accounts scandal broke. He appeared before House Financial Services in March 2020, two days after the committee’s majority staff released a report on the bank, and one day after two of its directors resigned.
The staff report
WextonMr. Scharf, have you had the opportunity to review the House Majority staff's report?
ScharfCongresswoman, yes, I have.
WextonNow, you know that in this report, they cited the July 2019 OCC report of the examination which concluded that the OCC had not observed a drive towards greater consistency, and a large number of plans had to be submitted multiple times to the OCC. You do acknowledge that, right?
ScharfYes, Congresswoman.
WextonAnd that the OCC remains concerned about the overarching vision around remediation.
ScharfYes, Congresswoman.
WextonOkay. And you also then are aware that the report concluded that Wells Fargo's board abdicated its responsibility to oversee the bank's compliance with the 2016 sales practices consent orders.
ScharfYes, I am aware that is what the report says.
WextonDo you agree that the board did not provide robust oversight of those consent orders?
ScharfCongresswoman, what I can talk about is what I have seen of the board since I have joined.
WextonOkay.
ScharfI wasn't there.
WextonThat is fine. We will just focus on being forward-looking.
[Hearing transcript, March 10, 2020, questioning by Rep. Wexton.]
Two directors
WextonBecause as a result of this report--well, I don't know if it is a result of this report, but right after this report was released, two of your directors resigned yesterday. Is that correct?
ScharfThey did resign Sunday, I believe.
WextonSunday. Okay.
ScharfSorry. Yesterday morning.
[Hearing transcript, March 10, 2020, questioning by Rep. Wexton.]
Six hundred million
Wells Fargo charged auto loan customers for guaranteed asset protection, a waiver that cancels the remaining balance if the car is destroyed and the insurance payout falls short. Representative Porter explained what happens when the loan is paid off early, and then produced a chart.
PorterBut when someone pays off the loan, there is no need for that GAP waiver. There is no need for debt cancellation because the debt is paid off, but you, Wells Fargo, keep charging for that GAP waiver. You didn't tell consumers after they paid off the loan early that you owed them money back, about $350 each. Effectively, the bank stole this money from 1.7 million consumers nationwide, leaving Wells Fargo sitting on over $600 million in ill-gotten gains. How much of that $600 million that Wells Fargo owes consumers in GAP overcharges has been returned?
ScharfCongresswoman, I don't know the exact number, sitting here, of what we have returned.
PorterOkay. The chart on the side, this is how much you owe, $600 million. This is how much you have returned, zero.
ScharfCongresswoman, there is no question if we have harmed customers, then we should, in fact, do that, and we will go back and take a look at the specific example and understand why it hasn't been done, and how we can move quickly to rectify it.
PorterThis is the pleading in that case that is pending in which Wells Fargo is currently arguing that even though it charged people for many years of GAP insurance, and the consumer paid off the loan early, they have not, in fact, refunded that GAP insurance. And that $350 means a lot. It is 18 bags of groceries for families.
[Hearing transcript, March 10, 2020, questioning by Rep. Porter.]
Porter had put the same $350 question to Scharf’s predecessor in the same room a year earlier. Timothy Sloan told her it was not the bank’s responsibility.