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Friday, 30 September 2016 05:17

Wells Fargo Doubles Down on Predatory Banking: Illegally Repossesses Cars of Military Members

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setp30repoWells Fargo even violates the law by repossessing cars of those serving in the military. (Photo: Don Hankins)

On September 9, I wrote about how the banking giant Wells Fargo went on an illegal spree of opening false credit cards, checking and saving accounts; charged customers fees for unrequested "services"; and then fired more than 5,000 employees when the Consumer Financial Protection Bureau (CFPB) discovered the illicit activity. The CFPB -- conceived by Elizabeth Warren -- has limited power to address systemic banking abuse, but it did force Wells Fargo to stop these practices and pay an extremely modest fine of less than $200 million.

Wells Fargo CEO John Stumpf scapegoated the terminated staff, who were paid an average of around $12 per hour. They were likely compelled to open fraudulent "cross-service" accounts to earn bonuses that would give them a living income. Stumpf himself has accumulated a reported $200 million in bank bonuses, while the executive -- Carrie Tolstedt – was expected to "retire" with a $20 million bonus.

Although Stumpf appeared to have escaped blame and financial penalty from the CPFB and other regulatory agencies, in the last week he ran into the buzzsaw of Elizabeth Warren and other senators at a Senate Banking Committee hearing. Warren has for years clamored that big bank executives should be held accountable for systemic deceptive and risky financial behavior in their institutions. Last week, Warren led the outraged condemnation of Stumpf for his nurturing of an environment that rewarded illegal behavior. CNN Money called it an "epic takedown": Warren called for Stumpf's resignation, accused him of "gutless leadership" and relentlessly castigated him for betraying consumers.

Stumpf may have thought that he was going to avoid any accountability after the original CFPB fine, but fortune is not shining upon him now. The treasurer of California has announced that it will halt much of its banking business with Wells Fargo. CNN Money also reported that Stumpf and Tolstedt will be issued multi-million dollar financial "fines" by the Wells Fargo board, in light of the Warren-led Senate committee hearings:

Wells Fargo CEO John Stumpf will forfeit much of his 2016 salary -- including his bonus and $41 million in stock awards -- as the bank launches a probe into its phony accounts scandal.

The fallout from the controversy has also resulted in its first major executive departure. Carrie Tolstedt, who headed the division that created the fake accounts, has left the company ahead of her scheduled retirement at year end.

Wells Fargo, under pressure from lawmakers and shareholders to take action, said Tolstedt will not receive a bonus or severance, and that she'll forfeit all of her $19 million worth of unvested stock awards. Wells Fargo also said Tolstedt has agreed not to exercise some $34 million in stock options, the bank's independent directors announced Tuesday.

However, we should not sit back and feel that justice has been done, nor should we worry that Stumpf or Tolstedt will become paupers, as CNN Money reports:

Tolstedt owns roughly $43.3 million in stock outright that she accumulated during her career with the bank, according to a letter Wells Fargo sent to Senator Elizabeth Warren. That means if she is allowed to keep her stock options, Tolstedt could leave Wells Fargo with stocks and options valued today at roughly $77 million.

Stumpf's accumulated bonus has only been reduced to about $155 million.

Nevertheless, after Stumpf's appearance before the House Financial Services Committee, he should be prepared for more "clawbacks" (reneging of company bonuses) in the future.

One might either be shocked or just respond with a "business as usual" shrug to the latest revelation of Wells Fargo's illicit and ignoble actions. However, as the website DEALBREAKER reports, Wells Fargo has also dealt a blow to military families. Recently, Wells Fargo admitted to illegally repossessing automobiles from members of the military. As Reuters reports:

Wells Fargo & Co was fined about $24 million on Thursday by federal regulators for alleged violations of the Service Members Civil Relief Act, piling more pressure on the bank already embroiled in a sales abuse scandal.

Wells Fargo Bank, doing business as Wells Fargo Dealer Services, agreed to pay more than $4.1 million after the Justice Department alleged it repossessed 413 cars owned by service members without obtaining a court order.

The unit of Wells Fargo also agreed to change its policies, the department said.

Separately, the bank was fined $20 million for violating the same act by the Office of the Comptroller of the Currency.

The bank violated three separate provisions of the act between about 2006 and 2016, the regulator, which did a separate investigation, said.

When the jingoistic corporate world starts messing with members of the military -- who are praised (and one could argue exploited) at every opportunity in corporate advertising, at sporting events and by politicians -- it has definitely gone one illegal toke over the line, even given a DC elite political world with endless tolerance for systemic illicit business activity. 

After all, fraud is forgivable in DC as long as the campaign contributions keep flowing. However, if banks such as Wells Fargo illegally repossess cars owned by members of the military, who is going to fight our wars of empire?

Not to be reposted without the permission of Truthout.