Democratic lawmaker rebukes Wells Fargo rebate request

[January 09, 2020]  By Imani Moise

(Reuters) - Democratic Representative Katie Porter, a first-term lawmaker known as a tough Wall Street critic, accused Wells Fargo & Co <WFC.N> of passing on costs associated with its wide-ranging scandals to third parties, in a scathing letter sent to the bank's new chief executive on Thursday.

A copy of the letter was viewed by Reuters.

Last summer, Wells Fargo asked 14 of its IT vendors to return 2.5% of revenue earned in 2018, claiming that the vendors benefited from increased business as a result of its sales-practices scandals. Reuters reported in November that several of the vendors had paid Wells Fargo, and some felt pressured to do so out of fear of lost future business.

"These small businesses played no role in the misdeeds committed by the Bank," Porter, who serves on the House of Representatives Financial Services Committee, said in the letter to Wells Fargo Chief Executive Charlie Scharf.

Wells Fargo did not immediately respond to a request for comment.

Wells Fargo representatives have said participation in the voluntary rebate would not be considered when awarding future contracts.

Asking for a rebate and linking it to higher costs due to regulatory backlash goes against the intent of regulator actions, Porter said.

"When federal watchdogs ... assess fines against bad actors, a major purpose of those fines is to discourage continued bad behavior," she said in the letter. "When those bad actors then pass the cost of those fines down to their vendors ... the purpose of the fine is subverted."

Porter requested that Wells Fargo refund the rebates by Jan. 30.

The letter is the second Porter has sent to Scharf since he took over in October and the latest sign that the company's woes in Washington are unlikely to abate any time soon. Last month, Representative Maxine Waters, chair of the House Financial Services Committee, said she would ask Wells Fargo board members to testify this year.

Wells Fargo has been under intense scrutiny since 2016 revelations that employees opened up potentially millions of unauthorized accounts. The scandal sparked multiple probes that uncovered issues in each of its main business lines and resulted in over $4 billion in fines and penalties.

The San Francisco-based bank has leaned on cost cuts in recent years as the fallout from the scandal stunted revenue growth. However, increased spending on headcount and technology to satisfy regulators has caused the bank to back away from its expense targets.

(Reporting by Imani Moise; Editing by Leslie Adler)

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