One year after such a public apology, one would expect that the bank, and its new CEO, Sloan, might have significant progress to announce. But much of his testimony on Tuesday sounded strikingly like the words of his predecessor. “The past year has been a time of great disappointment and transition at Wells Fargo,” Sloan said. “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.” (Ironically, as Sloan spent several minutes discussing handing over information to credit-reporting agencies in the name of protecting consumers, the former head of Equifax was nearby giving his own testimony about a massive breach of customers’ data.)
Indeed, the scandal has only gotten worse since it first came to light. Since Stumpf’s appearance before Congress, the estimated number of accounts affected has been revised up to 3.5 million. Additionally, a separate scandal, involving auto loans the bank issued, affected some 500,000 customers, who had insurance policies taken out in their names that sometimes resulted in defaults and vehicle repossessions.
While Sloan tried to focus on progress made in the past year—bringing up changes made to the bank’s organizational structure, review processes, plans for repaying customers, sales incentives, and corporate culture—the senators focused on how long it took Wells Fargo to open official inquiries into the claims of fake accounts, the predatory nature of the sales processes, and the compensation executives received. The committee members dwelled on the questions of how the bank’s practices could be improved and whether it should be allowed to continue operating in the first place.
The bank, however, will almost definitely not be shut down and its executives will likely keep their jobs. And similarly unlikely is the possibility that the bank will come up with any groundbreaking new plans to protect its customers. Hearings like Tuesday’s are often better suited to the political posturing of elected representatives than they are to forcing accountability.
But the hearing did lead to an important and possibly useful discussion about Wells Fargo’s controversial use of mandatory-arbitration clauses. Such clauses prevent customers from being able to take the company to court and from banding together in class-action lawsuits, and would instead require that they individually work things out with the bank’s lawyers. Though Sloan said that even getting to the point where arbitration was necessary is something he’d consider to be a “failure,” he supported the bank’s use of them. He suggested that mandatory-arbitration clauses aren’t widely used, and that their outcomes were typically better for customers than those of other legal routes. Sloan, citing research from the Consumer Financial Protection Bureau (CFPB), argued that “arbitration is fast and efficient for consumers, and consumers have higher returns.”