Equifax, Wells chiefs face angry lawmakers

Receiving Wide Coverage ...
The grilling on the Hill: Former Equifax CEO Richard Smith and Wells Fargo CEO Timothy Sloan took turns getting pummeled by lawmakers as they tried to defend themselves and their companies on Capitol Hill Tuesday.

“It is unconscionable that Equifax failed so spectacularly to protect people’s most sensitive personal data,” Rep. Ben Ray Luján, D-N.M., scolded Smith during his appearance before the House Committee on Energy and Commerce. “It’s like the guards at Fort Knox forgot to lock the doors and failed to notice the thieves were emptying the vaults,” added Rep. Greg Walden, R-Ore., the committee’s chairman. Smith faces two more days of similar grilling Wednesday and Thursday. Wall Street Journal, Financial Times, Washington Post, American Banker

According to the New York Times’ coverage of the hearing, Smith blamed the massive hack on a mistake by one employee at the credit bureau. “On multiple occasions, Mr. Smith referred to an ‘individual’ in Equifax’s technology department who had failed to heed security warnings and did not ensure the implementation of software fixes that would have prevented the breach,” the paper reports. “A company spokesman did not respond to questions about that employee’s status with the company.”

Despite the hack, Equifax still has at least one friend in government. Politico reports the IRS last week awarded a $7.25 million no-bid contract to Equifax to verify taxpayer identities and help prevent fraud. “Following an internal review and an on-site visit with Equifax, the IRS believes the service Equifax provided does not pose a risk to IRS data or systems,” the agency said.

Meanwhile, Sloan was taking flak from the Senate Banking Committee, particularly from the bank’s nemesis Sen. Elizabeth Warren, D-Mass., who told the Wells CEO he “should be fired.” But Sloan “defended the bank’s handling of its sales scandal and more recent consumer problems” and “ticked off a variety of changes Wells Fargo has made to its business over the last year, including those affecting management and customer practices,” the Wall Street Journal reports. Wall Street Journal, Financial Times, New York Times, American Banker

Zach Gibson/Bloomberg

To add injury to the insults, shortly after Sloan’s testimony Fitch Ratings downgraded the bank’s credit rating to A-plus, its lowest level since 1996, from AA-minus, a rating it has held for the past 21 years. The ratings agency blamed the downgrade on “several notable missteps in the company’s risk controls.”

Wall Street Journal
Shockwaves: Renovate America, the largest lender of energy-saving home improvement loans, announced an executive suite shake-up and the launch of an outside review of the company. The Journal has been reporting that the FBI and the Securities and Exchange Commission are investigating Renovate America’s business practices; the company insists it is cooperating with a probe of a third party and that it is not the target.

Regardless, management has been overhauled. CEO JP McNeill, who co-founded the company in 2008, was kicked upstairs into a long-term strategy role and named vice chairman. He will be replaced as CEO by Roy Guthrie, a former executive at Discover and Citigroup. His co-founder, chief operating officer Nick Fergis, is leaving the company. Skadden, Arps, Slate, Meagher & Flom is conducting the internal review.

Fighting back: The payday lending industry is fighting vigorously to fend off new rules from the Consumer Financial Protection Bureau. “The battle over the payday rule offers a glimpse into the changing landscape of rulemaking and the tactics employed to influence regulators,” the paper reports.

Quotable
“At best you were incompetent. At worst you were complicit. Wells Fargo needs to start over; that won’t happen until the bank rids itself of people like you.” — Sen. Elizabeth Warren, D-Mass., to Wells Fargo CEO Timothy Sloan.