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WASHINGTON D.C. — Today, Congressman French Hill (AR-02) participated in a House Financial Services Committee hearing where he questioned the President and Chief Executive Officer of Wells Fargo & Company, Timothy J. Sloan, on changes made to the bank's internal oversight practices and sales incentives following past consumer abuses and misconduct.


Key Excerpts:

Congressman French Hill: Thank you, Mr. Sloan, for appearing before the Committee today…. I spent my career on and off for 35 years in the community banking business, [and] I just want to express to you the same thing I expressed to your predecessor [when he appeared before the Committee in 2016], which is severe disappointment at the disconnect that Mr. Stump appeared to have at the Committee. I really agree with my friend, Mr. Williams, as a former business guy as well, that the lack of engagement that he demonstrated was severely disappointing. That comes from the fact in the 1990s when it came Dick Kovacevich and Norwest, that was a company that all of us in community banking benchmarked against, including standards of customer service and success. So personally, this is disappointing, and professionally as well. When [stump] was here, it was said that 900 Arkansas accounts were affected; we don't have a big retail presence by Wells Fargo in Arkansas. In the materials you sent out before the Committee hearing, it is 60% higher, 1,445 accounts, so that’s surprising that it is up that much. I hope that all these issues are resolved and that people are treated fairly in all these settlements. I was looking at some comments made by your largest shareholder, Warren Buffett. He made a comment in relation to the long-run earning power of Wells Fargo. Mr. Buffett said, “You can’t take away Wells’ customer base, it grows quarter by quarter. And what you make money off of is customers. And you make money on customers by having a hell of a spread on assets and not doing anything really dumb. And that's what they do.” But when asked as a follow-up, Buffett said a couple of years later, “They made one mistake…. incentives work. And they came up with improper incentives and they worked. And so, they [incentivized] bad behavior instead of [incentivizing] good behavior.” So, what I want to talk about is that. You say you changed your incentive system, which is at the heart of the issue, whether we are talking about the mortgage bank, the wealth management group, or the consumer bank. What is your use of independent secret shoppers at all your locations nationwide? How much money do you spend on it? I presume you have an independent third party doing that, in addition to any internal audit. Tell me about that.

Timothy Sloan: So, we do two things in our retail bank to check how our team is responding to customer needs and desires. One is we have independently collected customer service and customer loyalty scores; we do that on a weekly basis. We have a mystery shopper program.

Congressman French Hill: I want to know about the mystery shopper program. How often are they in your branches monthly? How big is that program overall, and how much money do you spend on it?

Timothy Sloan: We have tens of thousands of mystery shopper visits on an annual basis. I do not know how much we spend on it.

Congressman French Hill: Was that a big change from prior management?

Timothy Sloan: It is.

Congressman French Hill: Like on an order of magnitude of 100% better or 10% better?

Timothy Sloan: It didn't exist before now.

Congressman French Hill: It didn't exist. So, you didn't use mystery shopping as a standard banking practice.

Timothy Sloan: We may have used it from time to time, not on a consistent basis and not to the extent we do today.

Congressman French Hill: Well that is a major change. I know that Mr. Green mentioned that before in this Committee, and really, I don't know a bank of any size that doesn't mystery shop its consumers.

Timothy Sloan: By the way, I personally mystery shop at our branches, too. When I visit one of our branches, I don't let them know I’m coming. Sometimes I don’t dress like this, I dress like a normal customer. Sometimes they recognize me, sometimes they don't. It’s better when they don't because I really get an understanding of how our team is interacting with our customers. I call our phone centers and don't announce it.

Congressman French Hill: Would you please follow up with me and give me more description on the scope of your mystery shopping program? I will conclude with Buffett's testimony before Congress in 1991. Buffett said, "If you lose money for the firm by bad decisions, I will be very understanding. If you lose reputation for the firm, I will be ruthless." I urge you to be ruthless, Mr. Sloan.