Q&A: Why L.A. City Atty. Mike Feuer knew the Wells Fargo scandal was going to blow up

After Wells Fargo & Co. Chief Executive and Chairman John Stumpf was grilled by members of the Senate Banking Committee last week, regulators took the stand to answer senators’ questions about their investigation into the bank’s sales practices.

But one key figure was missing from the action: Los Angeles City Atty. Mike Feuer, whose office last year filed a lawsuit against Wells Fargo prompted by a 2013 Los Angeles Times article about the practices.

That suit drew the attention of the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. Those federal agencies joined with Feuer to hammer out a $185-million settlement with the San Francisco bank over allegations that thousands of its workers over several years created as many as 2 million accounts without customers’ authorization.

Feuer and his wife, Gail, were in Amsterdam and Croatia on what turned out to be a poorly timed vacation, one they thought about canceling once senators called for a hearing on the bank’s practices. They didn’t after Feuer thought better of it.

“This was not going to end with a single day of hearings,� he said.

Indeed, three weeks after the Sept. 8 deal was first announced, federal prosecutors and labor regulators are investigating the bank, Wells Fargo is clawing back compensation from Stumpf and a House committee hearing is scheduled for Thursday.

Feuer, 58, returned from Europe this week and on Tuesday spoke with The Times about the mushrooming scandal, the growing criticism of federal regulators and what else is on his agenda. Here’s an excerpt of that conversation.

There was plenty of coverage the day of the $185-million settlement, but were you surprised by the public reaction and the amount of media coverage since then?

I knew this was a case of great significance. I’ve been a legislator, and as a legislator, if I would get five or six dozen phone calls on an issue, that would be a very important issue. After we filed this case, we received more than 1,000 emails and phone calls. But what I expected was that, the week after the announcement, I would be doing a few follow-up conversations from overseas, tying up loose ends. What changed the ballgame was the decision by the Senate to hold hearings.

Were you surprised by that decision, or about how quickly the hearing was held?

I did not expect the committee would determine to do the hearings immediately. I thought it would be a week or a week and a half later. But clearly there was a moment here to be seized, and the Senate seized it. What emerged was a bipartisan consensus that the actions of Wells Fargo were in fact outrageous.

Do you regret not being on Capitol Hill for the hearing?

I thought very seriously about canceling most of the trip. But I was able to work on testimony from overseas, and I made the decision that my deputy, Jim Clark, would do a terrific job. I knew there would be a great deal of additional work to do when I returned. This was not going to end with a single day of hearings.

Congressional Republicans have been asking why it took a Times investigation and a lawsuit from your office to bring Wells Fargo’s practices to light — why federal bank regulators didn’t catch these practices earlier. What do you make of that?

They were using us. The quality of our working relationship with the OCC and the CFPB was extraordinary, and the result that was achieved could not have been achieved without the collaboration of all three of us. Irrespective of the motivations of anyone on the Hill who might want to say otherwise, this case is an example of the best of how government operates.

Still, it put you in an awkward position. It seems like you want to be able to take credit for pushing the case forward, but you don’t want to alienate the federal regulators.

I certainly want my staff to get credit for doing extraordinary work on this case. But this case is not about credit. It’s about protecting consumers.

Your office gets $25 million from the Wells Fargo settlement. Any idea how you might use it?

Every nickel is going to go to the work of our office to protect consumers. I’m hoping to expand our team with some additional legal staff and support staff. I want us to work on issues of sweeping consequence and have an impact throughout the state and the country.

Has this case changed how you think about your own finances or your relationship with your bank?

The short answer is no. But the broader answer is it’s inspired me to think carefully about the concerns consumers generally have about the institutions with which they have to interact. There’s a tremendous imbalance of power between consumers and institutions. It’s made me think about broader legal principles and policy changes.

Sounds like you might be talking about mandatory consumer arbitration clauses, which seem to have helped Wells Fargo keep complaints about fraudulent accounts out of the public eye.

You’re in the bull’s-eye of the one of the things I care about. Arbitration clauses and the negative effects they have on consumer rights are one of the major symptoms of this imbalance of power. If I had my druthers, these contracts that include arbitration clauses wouldn’t exist.

Is that something your office might look into?

It’s possible.

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