Date
23 January 2017
John Stumpf testifies before a Senate Banking Committee hearing. Angry senators want him to resign and take responsibility for millions of bogus customer accounts. Photo: Reuters
John Stumpf testifies before a Senate Banking Committee hearing. Angry senators want him to resign and take responsibility for millions of bogus customer accounts. Photo: Reuters

US senators want Wells Fargo chief head over bogus accounts

US senators denounced Wells Fargo & Co’s chief executive on Tuesday over millions of bogus accounts, reviving questions over whether banks are “too big to fail”.

Democratic Sen. Elizabeth Warren told John Stumpf to resign and take responsibility and warned he could face legal action, Reuters reports.

Senators said Stumpf’s apology is not enough, calling the affair fraud.

Stumpf told the Senate Banking Committee that customers who had bogus accounts opened in their name will be compensated for any damage to their credit rating.

He said he has told his managers to do “whatever it takes” to make customers whole, refunding fees or compensating them for damage to their credit ratings.

But he stood behind the former executive who ran the unit that oversaw many of the practices and at times downplayed the scope of the affair.

In answer to a question, he declined to commit to setting aside mandatory arbitration agreements that prohibit clients from suing Wells Fargo.

The Consumer Finance Protection Bureau has proposed a ban on such clauses that prohibit class-action lawsuits.

Earlier this month, the lender agreed to pay US$190 million in penalties and customer payouts to settle the case involving the creation of credit, savings and other accounts without customers’ knowledge.

About US$5 million will directly go to customers, many of whom might have paid a small fee on the unwanted accounts.

Besides potential criminal charges against the company and its executives, Wells Fargo may face pressure from shareholders to change its practices on executive pay and governance.

The scandal also renewed debate over whether US banks are “too big to fail” and need closer government oversight to prevent a massive collapse.

Lawmakers could use the fraud settlement as a springboard for new rules on executive pay, including clawbacks of compensation, and limits on forced arbitration.

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