Wells Fargo Chairwoman Betsy Duke and board member James Quigley have resigned from the bank's board, the bank announced on Monday.
The announcement follows a scathing House report that criticized the bank’s board and senior management for its failure to comply with consent orders issued by regulators in response to the bank’s widespread consumer abuses.
Charles Noski, who joined Wells Fargo’s board in June last year, will take Duke’s place as chairman, the bank said in a statement. Noski is a retired vice chairman and former chief financial officer of Bank of America.
The resignations come just days ahead of Wednesday’s congressional hearing, where Duke and Quigley are expected to testify in front of the House Financial Services Committee, regarding their response to a series of consumer abuse scandals. Wells Fargo CEO Charlie Scharf will face the committee on Tuesday.
Duke and Quigley will likely face tougher questions than Scharf, Ian Katz, an analyst at Capital Alpha Partners, told Banking Dive.
"[Scharf] hasn't been on the job very long, and has been sending a message that he's trying to get Wells in order," he said. "The problems there didn't happen on his watch."
Scharf joined the bank in October and has since initiated a series of changes at the San Francisco-based firm, including restructuring the bank’s business units, introducing a new no-overdraft fee account, raising the minimum wage, and putting an end to the bank’s policy of mandatory arbitration for employees claiming sexual harassment.
The country’s fourth-largest bank has been under scrutiny from lawmakers and regulators since 2016, when Wells Fargo employees were found to have created roughly 3.5 million fake accounts to receive sales-based incentives.
Katz said lawmakers will likely question Duke and Quigley over why they didn't do more or take the bank’s situation more seriously.
The departures follow strong statements from House Financial Services Committee Chairwoman Maxine Waters, D-CA, on Thursday, where the lawmaker called for both Duke and Quigley’s resignation following the release of the committee’s more than 100-page report.
"Both of them had a clear dereliction of duty as board members," she said on Thursday.
The report cites several exchanges that lawmakers said show a "lack of urgency" on Duke and Quigley’s part to respond to regulators in the aftermath of the scandal.
In one exchange, Duke questioned why requests from the Consumer Financial Protection Bureau (CFPB) were being sent to her rather than a department manager. Another email shows Quigley requested a meeting with regulators be postponed because it conflicted with a personal vacation overseas.
"Since we were made aware of the egregious harms suffered by Wells Fargo’s customers, we were and remain fiercely determined to do right by them and to strengthen the bank’s culture and controls," Duke and Quigley said in a joint statement.
"As the markets face increasing volatility, a strong Wells Fargo is needed now more than ever. Out of continued loyalty to Wells Fargo and ongoing commitment to serve our customers and employees, we recommended to our colleagues on the Board that we step down from our leadership roles and they have accepted our resignation from the Board. We believe that our decision will facilitate the bank’s and the new CEO’s ability to turn the page and avoid distraction that could impede the bank’s future progress."
Before her resignation, Duke was among the highest ranking women in the banking industry. She had served on Wells Fargo’s board since 2016 and became chair in January 2018.
Quigley, who had served on the bank’s board since 2013, is CEO emeritus at consulting firm Deloitte.
Last month Wells Fargo agreed to pay $3 billion to the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) as part of a settlement over the bank's fake-accounts scandal.
The bank was also ordered by the SEC this month to pay $35 million to unsuspecting clients harmed by its high-risk investment advice.