Wells Fargo (NYSE:WFC) may be a "boring bank," but that hasn't shielded it from scrutiny. Financial regulators are now probing the San Francisco bank over concerns that its "pressure-cooker" sales tactics have harmed customers, the Wall Street Journal reports, citing people familiar with the matter.
Investigators are peering into the bank's sales culture and its oversight over potentially questionable practices, sources told the Journal. Those practices have generated complaints within and outside the company, and have inspired a major lawsuit.
Filed by the city of Los Angeles, the lawsuit alleges that, due to its high-pressure sales environment, "Wells Fargo has generated a virtual fee-generating machine, through which its customers are harmed, its employees take the blame, and Wells Fargo reaps the profit."
The reported investigation comes amid a long winning streak for Wells. The bank has set itself apart from fellow financial goliaths in the post-crisis era by emphasizing bread-and-butter consumer banking services over high-flying investment banking. But that focus on the ordinary customer, which has helped the lender become the highest-valued financial institution in the world, could now damage the bank's reputation.
The lawsuit follows a 2013 investigation by the Los Angeles Times in which former employees described being subject to difficult sales quotas. Other former bankers told the newspaper that they illegally opened new customer accounts or ordered credit cards for clients without their permission, all in an attempt to meet sales goals. Former employees told the Journal they would have multiple meetings a day to review sales quotas.
The bank, meanwhile, said the actions of a few rogue employees do not represent the bank as a whole. "Wells Fargo’s culture is focused on the best interests of its customers and creating a supportive, caring and ethical environment," spokeswoman Mary Eshet told the Journal. Some company sales quotas have been dropped, employees told the newspaper.
Wells Fargo is an industry leader in generating revenue from ordinary consumers. The bank supplies an average of six products to its average retail customer, company filings show. For clients who use Wells Fargo's retirement and wealth management services, that number rises to more than 10 products per customer.
Both the Office of the Comptroller of the Currency and the San Francisco Federal Reserve are looking into the bank's practices, the report said.