Blumenthal, Senators Demand Answers from Wells Fargo on Military Lending

[WASHINGTON, DC] – Seeking to protect military families and active duty military personnel whose consumer rights may have been violated by Wells Fargo, a group of eleven U.S. Senators led by Richard Blumenthal (D-CT), the Ranking Member of the Veterans’ Affairs Committee, Jack Reed (D-RI), the Ranking Member of the Armed Services Committee, and Sherrod Brown (D-OH), the Ranking Member of the Banking Committee, are calling on Wells Fargo to step up compliance with the Servicemembers Civil Relief Act (SCRA).

The letter comes on the heels of Wells Fargo being fined a total of $24.1 million by the U.S. Department of Justice and the Office of the Comptroller of the Currency (OCC) for the bank’s alleged violations of the SCRA.  The SCRA was designed to ease financial burdens on servicemembers during periods of military service.  For example, the SCRA includes provisions that prohibit the eviction of military members and their dependents from rental or mortgaged property, and the law caps interest at 6% on debts incurred prior to an individual entering active duty military service.  In addition, under the SCRA, a court order is required before repossessing a vehicle belonging to a member of the military, if the servicemember took out the loan and made a payment before entering military service. 

“We are extremely disappointed to learn of the SCRA announcement. Combined, these abuses indicate that Wells Fargo has actually made it more difficult and stressful for our service members and their families by violating the very rights they have fought and continue to fight so hard to secure.  We are also concerned about potential compliance issues related to the Military Lending Act (MLA), including new rules that took effect on October 3,” the Senators wrote to Wells Fargo CEO John Strumpf and members of the Board of Directors.

The letter was signed by U.S. Senators Jack Reed (D-RI), Richard Blumenthal (D-CT), Sherrod Brown (D-OH), Chuck Schumer (D-NY), Dick Durbin (D-IL), Patty Murray (D-WA), Mazie K. Hirono (D-HI), Bob Menendez (D-NJ), Jeff Merkley (D-OR), Elizabeth Warren (D-MA), and Bernie Sanders (D-VT).

The Senators demanded answers to several questions, including:

1. On what date did you first become aware of the most recent SCRA violations at Wells Fargo?  Upon becoming aware of these violations, what did you specifically do to remedy these violations?  When was the Board of Directors first made aware of Wells Fargo’s SCRA violations?  What specifically did the Board of Directors recommend in terms of remedial actions?  
2. With respect to the fraudulent accounts opened by Wells Fargo employees, how many concerned military members, either active duty or reserve? 
3. Since the SCRA was enacted in 2003, how many times has Wells Fargo violated the SCRA?  For each violation, please describe the nature of the violation, the number of service members harmed, the financial harm imposed upon service members, the fine, penalty, or other remedy assessed, and whether Wells Fargo deducted any cost associated with these remedies from Wells Fargo’s tax returns.  If such a deduction was taken, please disclose the financial value of each such tax deduction.
4. For each Wells Fargo branch located on the premises of a U.S. military base, please provide the following information:

• The branch address and number of customers served;
• Since the opening of the branch, the revenue generated by each branch;
• The annual cost of the branch’s lease, including a fair market estimate for what a comparable lease would cost if the branch were located immediately off base;
• The number of unauthorized accounts or credit cards that were opened or issued;
• Whether any of the 5,300 terminated employees were employed at one of these branches;
• The cross-selling goals set for employees, including a list and a description of the various Wells Fargo products that could satisfy such cross-selling goals; and
• Whether there have been any other violations of local, state, or federal law at such branches and a description of how those violations were remedied.

  In light of these SCRA violations, please explain why Wells Fargo should be allowed to keep its branches on U.S. military bases?

A copy of the letter follows:

October 5, 2016

John G. Stumpf
Chairman and Chief Executive Officer
Wells Fargo and Company
420 Montgomery Street
San Francisco, CA 94163

Dear Mr. Stumpf:

We write to question Wells Fargo’s commitment to the well-being of our service members based on Wells Fargo’s inability to ensure compliance with the Servicemembers Civil Relief Act (SCRA).

As you may be aware, our country has a strong tradition of ensuring our service members are protected while they sacrifice to keep our nation safe.  Building on such efforts, Congress passed the Soldiers’ and Sailors’ Civil Relief Act as World War II escalated to provide crucial financial protections for service members to “enable such persons to devote their entire energy to the defense needs of the Nation.”  Now called the SCRA, this law includes such protections as prohibiting the eviction of service members and their dependents from rental or mortgaged properties and capping interest at 6 percent on debts incurred prior to an individual entering active duty military service.

Indeed, Wells Fargo acknowledges the importance of the SCRA on its web-site by stating “Wells Fargo appreciates the service of America's military personnel. That's why we offer expanded mortgage benefits that go beyond what the SCRA requires.”  It appears to us that rather than going beyond what the SCRA requires, Wells Fargo has systematically, over the past ten years, failed to live up to the basic requirements of the statute. 

On September 29, 2016, Wells Fargo settled with the Justice Department (DOJ) for “$4.1 million to resolve allegations that it violated the SCRA by repossessing 413 cars owned by protected service members without obtaining a court order.”  Related to the DOJ settlement, Wells Fargo paid a $20 million penalty to the Comptroller of the Currency (OCC) because it “found that between approximately 2006 and 2016, [Wells Fargo] violated three separate provisions of the SCRA.”  This is not Wells Fargo’s first SCRA violation.  In 2012, Wells Fargo settled with the Federal Government and State Attorneys General from across the country for foreclosure violations including violations of the SCRA.  Wells Fargo alone agreed to distribute $87.7 million to 720 eligible service members. These serious violations contradict Wells Fargo’s claim that it values our service members.  Indeed, these violations undermine the financial readiness of our troops, making it more difficult for them to devote their full energy to their military service and the Nation’s defense. 

Considering the settlements announced on September 8th against Wells Fargo by the OCC, Consumer Financial Protection Bureau, and the City of Los Angeles for opening unauthorized deposit and credit card accounts for your customers, we are extremely disappointed to learn of the SCRA announcement.  Combined, these abuses indicate that Wells Fargo has actually made it more difficult and stressful for our service members and their families by violating the very rights they have fought and continue to fight so hard to secure.  We are also concerned about potential compliance issues related to the Military Lending Act (MLA), including new rules that took effect on October 3. Given these troubling developments, we would appreciate answers to the following questions:

1. On what date did you first become aware of the most recent SCRA violations at Wells Fargo?  Upon becoming aware of these violations, what did you specifically do to remedy these violations?  When was the Board of Directors first made aware of Wells Fargo’s SCRA violations?  What specifically did the Board of Directors recommend in terms of remedial actions?  

2. With respect to the fraudulent accounts opened by Wells Fargo employees, how many concerned military members, either active duty or reserve? 

3. Since the SCRA was enacted in 2003, how many times has Wells Fargo violated the SCRA?  For each violation, please describe the nature of the violation, the number of service members harmed, the financial harm imposed upon service members, the fine, penalty, or other remedy assessed, and whether Wells Fargo deducted any cost associated with these remedies from Wells Fargo’s tax returns.  If such a deduction was taken, please disclose the financial value of each such tax deduction.

4. For each Wells Fargo branch located on the premises of a U.S. military base, please provide the following information:

o The branch address and number of customers served;

o Since the opening of the branch, the revenue generated by each branch;

o The annual cost of the branch’s lease, including a fair market estimate for what a comparable lease would cost if the branch were located immediately off base;

o The number of unauthorized accounts or credit cards that were opened or issued;

o Whether any of the 5,300 terminated employees were employed at one of these branches;

o The cross-selling goals set for employees, including a list and a description of the various Wells Fargo products that could satisfy such cross-selling goals; and

o Whether there have been any other violations of local, state, or federal law at such branches and a description of how those violations were remedied.

5. In light of these SCRA violations, please explain why Wells Fargo should be allowed to keep its branches on U.S. military bases. 

6. In light of these SCRA violations, is Wells Fargo in compliance with the MLA, which caps the annual interest rates for consumer credit to service members and their dependents at 36%? 

7. At Wells Fargo, who is ultimately responsible for the bank’s compliance with SCRA and the MLA?  Please describe in detail how this person or these persons have taken responsibility for Wells Fargo’s multiple SCRA violations.

8. Have you taken personal responsibility for Wells Fargo’s SCRA violations?  If so, please explain how.  

We would appreciate a response by October 27, 2016.

Sincerely,

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