California Gov. Gavin Newsom has signed legislation that remedies a problem Los Angeles prosecutors encountered several years ago during their investigation of fake customer accounts at Wells Fargo.
The problem was a chicken-or-egg scenario: Investigators could not issue subpoenas to the San Francisco bank until after they filed a lawsuit, but collecting enough evidence to file suit was more difficult as a result of the investigators' inability to seek the information they needed directly from the bank.
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But L.A. City Attorney Mike Feuer has lamented the fact that his office did not have the authority prior to filing a lawsuit to issue subpoenas, saying that it made the investigation of Wells Fargo less efficient.
Under the newly revised state law, the L.A. city attorney and certain other local prosecutors in the nation's most populous state will have the ability to issue subpoenas prior to filing a lawsuit under the Unfair Competition Law.
On Thursday, Feuer praised Newsom, a fellow Democrat, for signing the revised law. He cited not only the Wells Fargo suit, but also a range of consumer protection cases that his office has brought outside of the financial services realm.
"Time and again, we've successfully fought for hard-working Angelenos who've been ripped off — sometimes devastated — by unlawful business practices," Feuer said in a press release. "Our office will be all the more impactful now that we have this key investigative tool, allowing us to get to the heart of scams and put a stop to them even faster."
The California Unfair Competition Law prohibits unfair and fraudulent business practices, as well as false and misleading advertising.
Under the latest revisions, which were sponsored by state Rep. Brian Maienschein, D-San Diego, Feuer's office will be able to use the same investigative tools when looking into potential violations of the law that district attorneys and the California attorney general previously had. The new law is scheduled to take effect on Jan. 1, 2023.
The L.A. city attorney's office launched its investigation of Wells Fargo after the Los Angeles Times published an article in December 2013 about a pattern of sales misconduct at the bank. The prosecutors' office investigated the bank for nearly a year and a half before filing the civil suit.
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"I immediately instructed my staff to investigate to determine if the facts warranted our office filing an action pursuant to California laws that protect consumers against, and provide relief for, unfair business practices," Feuer stated.
"Because these laws do not afford my office pre-litigation subpoena power, our investigation consisted of good old-fashioned detective work. We conducted numerous interviews with former Wells Fargo employees and Wells Fargo consumers, pored over public records, including voluminous court records from wrongful termination lawsuits former employees filed against Wells Fargo, and made use of the consumer complaint databases of the Consumer Financial Protection Bureau and the Federal Trade Commission."
When the lawsuit was eventually filed, it described several unfair practices by Wells Fargo employees, including "pinning," which involved assigning PIN numbers to customer debit cards without their permission with the purpose of impersonating them on company computers and enrolling them in services without their consent.
After Feuer's office filed its suit, the Office of the Comptroller of the Currency and the CFPB became more interested in sales abuses at Wells Fargo. In September 2016, the CFPB, the OCC and the L.A. city attorney's office jointly reached a $185 million settlement with the bank.
Six years later, fallout from the fake-accounts scandal — including an asset cap that the Federal Reserve Board imposed on the bank in 2018 — continues to put constraints on Wells Fargo.
