Wells Fargo's (WFC) banking scandal is growing even bigger.
The bank is now saying it has found 3.5 million fake accounts, a dramatic increase from the 2.1 million accounts it originally estimated.
In the weeks and months after the bank acknowledged in September 2016 that its employees opened 2.1 million accounts without getting customers' permission, the bank agreed to look for fake accounts going back an additional two years to 2009. This was because news reports showed that problems at Wells started before 2011, which is what Wells originally admitted.
"We apologize to everyone who was harmed by unacceptable sales practices that occurred in our retail bank," said Wells Fargo CEO Tim Sloan.
The disclosure prompted new calls from some lawmakers and consumers for additional changes at the bank, and one analyst said it's likely to keep a regulatory spotlight on the company. Senator Elizabeth Warren, D-Massachusetts, called for removal of the bank's board members who had served during the scandal. "Unbelievable," she wrote on Twitter about the revelation of the additional fraudulent accounts.
"This raises the probability that Congress this fall holds hearings on the ever-expanding Wells Fargo fake account controversy," wrote Cowen analyst Jaret Seiberg in a research note. "As a result, we believe the political and regulatory spotlight will continue to shine brightly on Wells Fargo. That is likely to limit the ability of the bank to grow aggressively."
Both parties are likely to use the revelation as an argument either for and against the Consumer Finance Protection Bureau, he added. The Republicans will likely point to the scandal as an example of the ineffectiveness of the consumer watchdog agency, while the Democrats will say it shows the CFPB is needed because financial institutions can't be trusted, he said.
"For us, the big question is how the bank responds now?" Seiberg wrote. "On that front, Hurricane Harvey provides Wells Fargo with the opportunity to create political capital if it is seen as taking the lead in helping individuals and businesses recover from the disaster."
Wells Fargo said it's donating $1 million to Harvey relief efforts and is waiving fees in areas hit by the storm, yet that is similar to steps that other banks are taking.
Wells plans to pay out an additional $7 million in refunds to the impacted customers. The new analysis found that about 190,000 accounts incurred fees and charges, compared with the 130,000 previously identified accounts.
Separately Wells also found 528,000 customers were signed up for online bill pay when they did not ask for it. The bank will give $910,000 in refunds to those customers.
The sales-focused culture at Wells Fargo is blamed for creating incentives for employees to open fake accounts, with some of those workers fearful they would lose their jobs. One former Wells Fargo bankerthat her branch "doubled our goals and decreased our performance pay," leading to stress and managers looking the other way at unethical behavior.
Wells Fargo earlier this year clawed back more than $75 million of pay from its former CEO, John Stumpf. The company's "broken" sales model was overseen by retail bank leader Carrie Tolstedt, who in an internal investigation was described as a defensive boss obsessed with stamping out negative views about her division.