NEW YORK (Reuters) - The scandal over improper sales practices at Wells Fargo & Co extended to thousands of small-business owners, according to a U.S. lawmaker, raising questions about the scope of the bank’s issues with unauthorized accounts.

A Wells Fargo Bank is shown in Charlotte, North Carolina, U.S., September 26, 2016. REUTERS/Mike Blake

In a Sept. 29 letter viewed by Reuters on Tuesday, Sen. David Vitter, a Louisiana Republican, demanded that Wells Fargo Chief Executive John Stumpf provide a “full accounting” of customers affected. Vitter is a member of the U.S. Senate’s banking committee and also heads its small business committee.

Discussions between congressional staffers and Wells Fargo “have indicated that the fraudulent activity of your employees was not limited to Wells Fargo’s consumer banking operations,” Vitter wrote. “Thousands of small business owners were impacted by this fraud.”

A person familiar with Vitter’s probe say Wells has identified about 10,000 small business accounts that were subject to improper practices. Vitter spokeswoman Cheyenne Klotz declined to comment on specifics about those practices.

Revelations of Wells Fargo’s problems with small-business customers come almost a month after it reached a $190 million settlement over opening as many as 2 million accounts in retail customers’ names without their knowledge. The bank has said it fired about 5,300 employees for improperly opening the accounts.

The disclosures have caused a public furor, with Stumpf facing heated questions before two congressional committees and other U.S. authorities launching investigations into the bank’s sales practices, including the Justice Department and the Labor Department.

“While the vast majority of accounts in the settlement were consumer accounts, to the extent there were small business accounts included, all were previously reported in the total number of potentially impacted accounts,” said Wells spokeswoman Jennifer Langan. “As stated earlier, Wells Fargo has already refunded 115,000 accounts. The impacted accounts, including Small Business, were part of our Retail Bank business.”

A Consumer Financial Protection Board spokesman contradicted the Wells statement, however, saying its figure of nearly 2 million accounts being affected did not include small business accounts.

Wells is also battling lawsuits from former employees, customers and shareholders related to the issue. In a second letter, Vitter requested that the Small Business Administration’s inspector general, Peggy Gustafson, investigate Wells, too.

PACKAGES OF THREE

Senior bank executives have apologized for opening accounts customers did not request, but characterized the issue as limited to relatively few customers and employees in the retail bank. Early results from Vitter’s examination are the first hard sign that problems may extend further.

Reuters also spoke to a former Wells employee, and a lawyer representing former employees and a former and current Wells customer, who described abusive sales practices with multiple business accounts. Jose Maldonado, a restaurant owner in Southern California who banked with Wells Fargo for 15 years, said he discovered seven accounts after enlisting the help of his accountant. He initially closed extraneous ones, and ultimately moved his remaining business to Bank of America Corp and JPMorgan Chase & Co.

“I don’t like Wells Fargo anymore. I don’t feel comfortable,” Maldonado said in an interview. “In the past, there were sometimes crazy accounts without my permission.”

Langan declined to comment on Maldonado’s accounts.

An ex-Wells Fargo business banker, who declined to be identified, said employees at his former branch were required to sell products to small business customers such as hair-salon owners and carpet cleaners in packages of three - regardless of whether they needed them.

Those typically included accounts for checking, credit card processing and payroll, and were often linked to additional savings accounts, said the former Wells banker. Bankers also tacked on business credit cards and were pressured to call a Wells insurance unit, with the customer present, to push business liability policies. Langan, the Wells spokeswoman, said the bank discontinued those packages in April 2015.

Attorney Jonathan Delshad filed two class-action lawsuits against Wells Fargo in September on behalf of former employees, including one business banker, who say they were fired for refusing to create fake accounts to hit sales quotas. Wells suspended those quotas on Oct. 1.

Other former Wells Fargo business bankers contacted Delshad after the lawsuit received media attention, he said. “Business owners are also being ripped off,” one wrote to him in a message he provided to Reuters.

SOURED RELATIONSHIPS

Business and corporate governance experts say small-business customers can be as susceptible to fraud as any customer.

Owners are typically knowledgeable about their business expertise but not about banking services, said Peter Conti-Brown, a financial regulation professor at the University of Pennsylvania’s Wharton School. For example, a new dentist who borrows from a bank to buy a practice may then need other services that she does not even know exist, such as payroll management or credit-card clearing.

But the potential for abuse still exists, he said. A bank can sell multiple, unnecessary accounts and credit cards to sole proprietors whose needs rarely exceed making deposits and writing checks. The risk of abuse is greater when bankers are required to sell a certain number of products to meet performance goals.

“The best case is that you will sour your relationship, and in the worst case, you’ll get bankers committing fraud,” Conti-Brown said. “Wells Fargo has seen both of these things.” (This article corrects the lede to add the dropped word “of”)</s>Wells Fargo & Co's account scandal is not limited to its consumer banking sector, U.S. Senator David Vitter told the bank's chief executive in a letter.

Thousands of small business owners were also impacted by Wells Fargo's practices, wrote Vitter, a Republican from Louisiana, in a letter dated Sept. 29 to Wells Fargo chief executive John Stumpf and seen by Reuters.

Vitter demanded a "full accounting" of small business owners affected by "fraudulent activity." Around 10,000 small business accounts were affected by improper Wells practices, people familiar with the matter said.</s>Thousands of small business owners were also impacted by Wells Fargo's practices, wrote Vitter, a Republican from Louisiana, in a letter dated Sept. 29 to Wells Fargo chief executive John Stumpf and seen by Reuters.

Vitter demanded a "full accounting" of small business owners affected by "fraudulent activity." Around 10,000 small business accounts were affected by improper Wells practices, people familiar with the matter said.

A Wells Fargo spokeswoman could not immediately be reached for comment about Vitter's letter.

Vitter, who chairs the U.S. Senate's small business committee, launched a probe on Sept. 20 into whether the bank’s opening of as many as 2 million accounts in customers’ names without their permission had any impact on small businesses.

Wells Fargo spokeswoman Jennifer Langan said last week that Wells is reviewing earlier request letters sent by Vitter and will address them “in a timely manner.”

The bank also plans to share information about its operations and lending with the U.S. Small Business Administration (SBA), Langan added at the time.</s>As some states are reconsidering their relationships with Wells Fargo after the revelation that it opened millions of unauthorized accounts for its customers, the issue of whether Maryland can do the same — and whether it will — has yet to be determined. Maryland treasury officials said Monday that the state agency is not evaluating its relationship with Wells Fargo, as ...</s>SPRINGFIELD (AP) — Illinois state Treasurer Michael Frerichs says Wells Fargo will lose millions of dollars in fees after the state suspended $30 billion in investment activity with the troubled bank Monday.

Frerichs said at a news conference in Chicago that Illinois will stop using Wells Fargo as a broker-dealer to purchase investments because of illegal practices by the nation's second-largest bank. The Democrat says he will re-evaluate the bank after one year.

U.S. and California regulators fined San Francisco-based Wells Fargo $185 million, saying employees who were trying to meet sales targets opened up to 2 million accounts without customers' knowledge. Federal regulators have not said whether they've referred the case to the Justice Department.

Frerichs says he doesn't know precisely how much Illinois' action will cost Wells Fargo.</s>Illinois treasurer, Hillary Clinton take aim at Wells Fargo over scandal

The fallout over a fake accounts scandal widened Monday for Wells Fargo, with officials in Illinois pulling business from the bank and Democrat Hillary Clinton targeting the company on the presidential campaign trail.

Illinois State Treasurer Michael Frerichs on Monday said he was suspending $30 billion in investment activity with the San Francisco-based bank, while Chicago Treasurer Kurt Summers said he is divesting $25 million invested with Wells. The move follows a similar step by California’s treasurer last week.

In North Carolina, the office of State Treasurer Janet Cowell said it’s monitoring the situation and studying “whether Wells Fargo’s past business practices had any effect on North Carolina government accounts.”

The treasurer’s office has “no plans to take any additional action at this time,” spokesman Brad Young said.

On Sept. 8, Wells agreed to pay $185 million in fines over allegations of “widespread illegal” sales practices that dated to at least 2011. Regulators said bank employees, racing to meet aggressive sales goals, opened two million accounts that may not have been authorized by customers.

The revelations have led to congressional hearings, additional federal investigations and calls for Wells Fargo CEO John Stumpf to resign.

Wells has its biggest employee hub in Charlotte, N.C., with more than 23,000 employees.

Wells spokesman Gabriel Boehmer said the bank has worked with the State of Illinois and the City of Chicago since 1970 in a unit that is separate from the retail bank, where the accounts scandal took place.

“We certainly understand the concerns that have been raised,” Boemer said. “We are very sorry and take full responsibility for the incidents in our retail bank.”

The treasurers’ actions are mostly symbolic. They will cost the bank a few million dollars in fees, according to the Los Angeles Times, which is relatively small for a company that posted a 2015 profit of $22.9 billion.

Meanwhile, Clinton said she would work to curb the use of arbitration clauses that can make it harder for consumers to sue companies.

Lawmakers have said such clauses at Wells Fargo will make it more difficult for customers to bring claims over unauthorized accounts at the bank.

“We saw one of our country’s biggest banks, Wells Fargo, bully thousands of employees into committing fraud on unsuspecting customers,” the campaign said in a statement, vowing to restrict practices that “businesses like Wells Fargo have used to lock the consumers they’ve harmed out of court.”

Wells Fargo spokesman Mark Folk said the bank is “working to make things right” if any customer has a product or service they don’t want or need. In cases where customers received a product they did not authorize in connection to the bank’s recent settlement, Wells is providing free mediation “through an impartial third party,” he said.

Wells CEO Stumpf has faced searing questioning from Senate and House committees for his oversight of the bank, with some lawmakers calling on him to step down and to face prosecution.

Stumpf has repeatedly said he was “deeply sorry” for the San Francisco-based bank’s conduct, and on Sept. 27 the bank’s board announced he would forfeit all of his outstanding unvested equity awards, worth $41 million, and forgo his salary during a board investigation.

He had given no indication he plans to leave, saying he is committed to fixing the bank’s problems. Thursday’s hearing before the House Financial Services Committee showed that the issue has political staying power, said Jaret Seiberg, an analyst with Cowen and Company, in a research note Friday.

The issue will likely spread to other banks, with lawmakers calling for probes of industry practices and legislation to break up big banks, he wrote.

“The independent directors on the board of Wells Fargo have about six weeks to devise a plan for the future,” Seiberg said in the note. “If they are going to change management, now is the time to act. And if they plan to back Stumpf, then the bank needs to use the (congressional) election recess to devise a political strategy to justify the decision.”

Other investigations are already piling up for Wells Fargo.

The Labor Department has launched a review of how the bank treated its employees, and the Observer has reported that federal prosecutors in Charlotte and San Francisco are heading up an investigation of the bank.

In a CNBC interview Monday, JPMorgan Chase CEO Jamie Dimon said his bank has received information requests from various agencies in the wake of the Wells Fargo controversy, saying when someone “does something wrong in the industry everyone gets request from everybody else.”

On Monday, Deutsche Bank analysts lowered 2017 earnings per share estimates for Wells Fargo from $4.12 to $3.97 to “account for the potential ongoing impact of the company’s sales practices.” The bank continues, however, to keep a “Buy” rating on the stock.

Wells Fargo is scheduled to report its third-quarter earnings Oct. 14. The bank’s shares are down about 12 percent since the scandal emerged, falling 1 percent to $43.83 Monday, on a down day for the markets. The stock hasn’t been this low since the spring of 2014.</s>The state of Illinois is suspending most of its banking relations with Wells Fargo.

Illinois is the second state, following California, to punish Wells Fargo with a one-year business moratorium in the wake of the bank's fake account scandal.

Illinois is taking away about $30 billion worth of transactions from Wells Fargo. The amount includes money that is spent to pay state bills, in addition to its investment portfolio. Wells Fargo earns millions of dollars from the transactions, according to the Illinois Treasurer.

"Wells Fargo is a big financial player in Illinois and I hope to send the message that their unscrupulous practices won't be tolerated," Illinois Treasurer Michael Frerichs said Monday.

The one-year suspension means the state will not use the bank as a broker-dealer for any investments, nor buy any Wells Fargo debt.

The suspension doesn't apply to some business contracts with Wells Fargo that the Treasury is obligated to do honor. It also doesn't apply to Illinois' pension funds or bond underwriting, but Frerichs said he urged those investment boards to review their contracts with Wells Fargo as well.

The state owns $25.5 billion of Wells Fargo debt and $1.5 billion in other assets, which it doesn't plan to sell.

Chicago Treasurer Kurt Summers also reportedly said Monday that he too plans to divest what the city has invested with Wells Fargo, according to Bloomberg. His office did not immediately respond to a request for comment from CNNMoney.

The blows keep hailing down on the bank ever since federal regulators announced it had secretly created as many as 2 million unauthorized accounts since 2011.

Wells Fargo is now facing an onslaught of lawsuits, criminal investigations and fines of $185 million so far.

In a statement, Wells Fargo, said its business with Illinois and Chicago is handled in a division separate from the retail bank.

The bank said that it is "very sorry and take full responsibility for the incidents in our retail bank," and that it is taking steps to address the issues that have been raised.

Related: I called the Wells Fargo ethics line and was fired

For now, Illinois will move its investments with Wells Fargo to other companies who will bid for the contract. The state has a list of approved as broker- dealers.

Frerichs said the state does not know, exactly, how much Wells Fargo (WFC) earned on its investment activity. Wells Fargo takes a cut, but the state does not write the bank a check, he said. He estimated the cut to be in the millions of dollars for one year, but less than tens of millions.</s>The ban includes bond underwriting, brokerage, trustee and other services the bank has provided to Chicago. Wells Fargo has earned $19.5 million in fees from Chicago since 2005.

Wells Fargo staff opened checking, savings and credit card accounts without customer say-so for years to satisfy managers' demand for new business, according to a $190 million settlement with U.S. regulators and California prosecutors reached on Sept. 8. The bank said it fired 5,300 employees over the issue.

"I hope this action by the city of Chicago will echo around the nation and make it clear to other institutions this conduct is unacceptable," said Alderman Edward Burke, who heads the council's finance committee.

Wells Fargo said it was disappointed in Chicago's action, but that it would continue to serve local customers and support nonprofit community agencies and educational institutions and foundations.

“Wells Fargo is disappointed that the Chicago City Council has chosen to suspend a relationship with one of the nation’s safest and strongest financial institutions at a time when the city needs access to dependable financial partners," the bank said in a statement.

Last week, California State Treasurer John Chiang announced a sweeping suspension of the state's business relationships with Wells Fargo for the next 12 months. Illinois Governor Bruce Rauner's office, which included Wells Fargo in a pool of senior underwriters for bond sales, said on Sunday the state would not be using the bank for debt deals "until further notice."

Illinois Treasurer Michael Frerichs on Monday suspended $30 billion in state investment activity with the bank. Those activities include investments in Wells Fargo debt and bank broker/dealer services.</s>The ban includes bond underwriting, brokerage, trustee and other services the bank has provided to Chicago. Wells Fargo has earned $19.5 million in fees from Chicago since 2005.

Wells Fargo staff opened checking, savings and credit card accounts without customer say-so for years to satisfy managers' demand for new business, according to a $190 million settlement with U.S. regulators and California prosecutors reached on Sept. 8. The bank said it fired 5,300 employees over the issue.

"I hope this action by the city of Chicago will echo around the nation and make it clear to other institutions this conduct is unacceptable," said Alderman Edward Burke, who heads the council's finance committee.

Last week, California State Treasurer John Chiang announced a sweeping suspension of the state's business relationships with Wells Fargo for the next 12 months. Illinois Governor Bruce Rauner's office, which included Wells Fargo in a pool of senior underwriters for bond sales, said on Sunday the state would not be using the bank for debt deals "until further notice."

Illinois Treasurer Michael Frerichs on Monday suspended $30 billion in state investment activity with the bank. Those activities include investments in Wells Fargo debt and bank broker/dealer services.</s>Hillary Clinton is holding up Wells Fargo as Exhibit A in what's wrong with Corporate America.

The Democratic presidential nominee condemned Wells Fargo (WFC) on Monday for "bullying thousands of employees into committing fraud against unsuspecting customers."

The mere mention of Wells Fargo elicited boos from supporters in Toledo, Ohio. Clinton called Wells Fargo out for the up to 2 million fake accounts created by the bank and the pressure-cooker culture that is said to have created the massive fraud.

"It's outrageous that eight years after a cowboy culture on Wall Street, we are still seeing powerful bankers playing fast and loose with the law," she said in the speech.

Clinton's bashing of Wells Fargo stands in stark contrast with Donald Trump. While a top economic adviser to Trump called the Wells Fargo scandal "just stupid, greedy behavior," the candidate himself has been silent since the news broke on September 8. That's despite scathing criticism of Wells Fargo by both Republicans and Democrats in Congress at two separate hearings into the scandal.

Clinton stopped well short of Rep. Maxine Waters' dramatic call last week to break up Wells Fargo. The former First Lady also didn't echo the calls from Elizabeth Warren for Wells Fargo CEO John Stumpf to step down and be criminally investigated.

However, Clinton said she wants to prevent a repeat of the Wells Fargo scandal by doing the following:

Defending the consumer watchdog: Clinton reiterated her commitment to defending the Consumer Financial Protection Bureau (CFPB). Many Republicans are in favor of "gutting" the regulator.

The CFPB is the watchdog created after the Great Recession and a brainchild of Senator Warren. The agency, along with two other regulators fined the bank $185 million.

Trump too wants to dismantle the CFPB. The Republican Party's 2016 platform that Trump's team helped write specifically calls for repealing the CFPB.

"Not on my watch, Donald. We're never going to let that happen," she said.

Clinton's campaign said in addition to defending the CFPB, she would "give it the tools and authorities" to protect more consumers.

Related: Punish Wells Fargo? Yes. Break it up? No.

Erasing the fine print that handcuffs consumers: Many wronged Wells Fargo customers find out they can't sue the bank. That's because they sign documents with fine print that forces them into closed-door arbitration rather than give them their day in court.

Clinton said she wants to curb the increasingly-popular use of forced "arbitration clauses" in the fine print of contracts. These clauses help protect big companies like Wells Fargo from legal action.

Many Wells Fargo customers learned the hard way that they effectively signed away their rights when they signed up for an account. According to the L.A. Times, Wells Fargo has successfully blocked lawsuits from customers with fake accounts by pointing to the fine print requiring disputes be settled in arbitration.

Clinton's campaign said she will call on Congress to give the FTC, FCC, Labor Department and other federal agencies the power to restrict the use of arbitration clauses. The Democrat will also order agencies to use their existing authority to prevent overuse of these clauses.

"We can't let corporations like Wells Fargo use these fine print 'gotchas' to escape accountability," Clinton said.
The scandal over improper practices of unauthorized accounts at Wells Fargo extends to thousands of small-business owners.