Wells Fargo & Co. asked outside technology consultants for a rebate equal to 2.5% of what they had earned from the bank in 2018 because they have benefited from increased business due to the bank's various regulatory scandals, The Wall Street Journal reported, citing sources familiar with the matter and emails it viewed.
The company met with technology vendors July 18 in Charlotte, N.C. The company also discussed other cost-cutting initiatives, including eliminating offices with low occupancy and cutting some middle management jobs, according to the sources. The vendors have until Aug. 2 to decide whether to voluntarily pay the rebates, which were requested by Head of Technology Saul Van Beurden.
A Wells Fargo spokesperson declined to comment when contacted by the Journal.
The banking giant has been dealing with an onslaught of consumer abuse scandals in recent years, notably the unauthorized opening of millions of customer accounts, improper charging of fees on mortgage-rate lock extensions and "force-placing" collateral protection insurance on auto loans. The fake accounts scandal resulted in Wells Fargo paying a $185 million fine in September 2016 to federal regulators, while the Consumer Financial Protection Bureau handed out the largest penalty in its history by ordering the company to pay $1 billion for the two latter scandals. The fine was evenly split between the CFPB and the Office of the Comptroller of the Currency.
Wells Fargo in December 2018 agreed to pay $575 million to various U.S. states to settle claims on a wide range of consumer protection law violations, which included the fake accounts scandal and the issues on auto insurance and mortgage interest rate lock. The onslaught of consumer abuse scandals resulted in an unprecedented order from the Federal Reserve to ban the company's assets from growing beyond end-2017 levels.
Timothy Sloan, who was grilled on the consumer abuse scandals by Democrats and Republicans in a House Financial Services Committee hearing in March, stepped down as President and CEO on March 28 and was replaced by General Counsel C. Allen Parker on an interim basis. Since then, Wells Fargo has struggled to find a permanent replacement. Notable executives who have turned down the role include PNC Financial Services Group Inc.'s President and CEO William Demchak and former U.S. Bancorp CEO Richard Davis. JPMorgan Chase & Co. co-COO Gordon Smith has also been approached. Sources said he is unlikely to make the jump.
In its second-quarter earnings call, executives said risk management and compliance functions improvements will push full-year 2019 expenses to the upper bound of its guidance. CFO John Shrewsberry also added that the outlook for 2020 is "cloudy" given its CEO search and that the new hire could refocus the company's strategy.