NEWARK, N.J.–The problems and challenges for Wells Fargo continue to mount, with an insurance company severing its relationship, the bank being sanctioned by its hometown, and most recently being told by regulators that its “living will” is DOA.
Prudential said it is suspending sales of its life insurance policies through Wells Fargo until an investigation into the bank’s sales tactics can be completed. Wells Fargo is under scrutiny and the subject of a number of lawsuits related to a scandal that involved more than 5,000 employees, a high-pressure environment, and the opening of more than 2,000 bogus accounts.
The Prudential announcement comes at the same time the bank itself said it had temporarily stopped selling another insurance product it had offered at its branches: renters’ insurance from Assurant.
Three former Prudential employees have filed a whistleblower lawsuit that alleges the company knew Wells Fargo employees were opening sham “MyTerm” Prudential policies in the names of customers and had tried to hush it up. According to the suit, many of the victims did not speak English, the suit said.
The employees are alleging they were fired by Prudential in retaliation for attempting to get superiors to act on what they had discovered.
Prudential has responded by saying the suit is without merit.
Meanwhile, the board of supervisors in Wells Fargo’s hometown has passed a resolution to sanction the bank for harmful activities against its customers living in the Bay Area and elsewhere.
The resolution calls for a suspension of the bank from certain business lines with the City of San Francisco, urges the bank to be more transparent about the consumer account fraud impact in San Francisco, and calls for the San Francisco Treasurer to report back to the Supervisors in July 2017 about whether the bank has engaged in any remediation. If it has not, the Controller may place additional sanctions on the bank, such as suspending it from competitive bond sales or full debarment for up to five years, according to the city.
The City Controller’s office said the resolution calls on the city to:
- Suspend for two years Wells Fargo’s provision of broker/dealer, commercial banking, and commercial paper dealer services to the city.
- Remove Wells from consideration for two years for provision of securities investments and counterparty/repurchasing agreements.
- Urges the city attorney to investigate if other banks engage in similar practices.
- Urges the district attorney to explore a possible criminal investigation of former CEO John Stumpf and other Wells Fargo executives
- Urges the Office of the United States Comptroller of the Currency to explore if Wells Fargo’s actions should lead to the OCC revoking Wells Fargo’s national banking charter.
Finally, for the second time in 2016, Wells Fargo has failed a regulatory test related to reducing the threat of large banks to the economy—the bank’s plan for how it, in the event of a collapse, would unwind itself in a way that would safeguard the economy. Those plans are often referred to as “living wills.”
But federal regulators have rejected Wells Fargo’s plan, and as a result it will be prohibited from establishing new international units or acquiring a subsidiary that is not a bank.
Wells has until March 31, 2017, to fix its plan.