Here’s what happened last time Wells Fargo CEO took questions from lawmakers
Wells Fargo has been quietly bulking up its call-center operations in the Philippines, adding positions in the southeast Asian country where it has long kept offshore jobs.
The move by the third-largest U.S. bank by assets is occurring even as other companies have done the reverse in recent years – transferring call-center functions back to the U.S. It also comes as Wells Fargo continues to reel from a sales scandal that erupted in 2016.
Wells Fargo has had operations in the Philippines since at least 2011, including information technology and other roles, but had not received much attention in the U.S. for its more recent expansions in the island republic.
This spring, however, the bank said the operation had grown from less than 100 to more than 4,000 over six years. Wells also said it was building another location that could seat more than 7,000.
The issue came to light this month during a Senate hearing on the sales scandal, when Sen. Joe Donnelly questioned CEO Tim Sloan about cutting American call-center workers while beefing up operations in the Philippines.
“I’ve learned that Wells Fargo has eliminated several hundred jobs here in this country recently, and more in recent years,” Donnelly, an Indiana Democrat, told Sloan. “At the same time that you were letting these people go, you were adding on positions in the Philippines. How is that making it right by your people here that work for Wells Fargo?”
Sloan defended the practice. He said positioning employees worldwide helps the San Francisco-based company serve customers around the clock. The CEO also pointed out that, of Wells’ roughly 270,000 employees, more than 90 percent are in the U.S.
“The reason for that is it’s where most of our business is done,” said Sloan, noting Wells has 15,000 open U.S. positions. “We love doing business in this country.”
Wells declined to provide details on growth across its Filipino operations. But it said its call-center presence there is equivalent to the size of its U.S. call centers. In Charlotte, the bank has a call-center operation in the University area.
Offshoring call-center jobs is not new for American companies.
Decades ago, many firms flocked to set up such operations overseas, where labor costs tended to be cheaper. India, the Philippines and even Ireland became hot spots for those jobs.
But such moves have slowed since the Great Recession, when many industries ramped up efforts to hang on to their customers in a struggling economy, according to Paul Stockford, research director for the National Association of Call Centers. In the past, American callers have had frustrating experiences dealing with heavily accented foreigners in call centers.
Most U.S. airlines, for example, have brought their call-center operations back from overseas, Stockford said. In addition, rising wages in many foreign countries have made it costlier to offshore jobs.
“I think Wells Fargo is not the norm at this point,” Stockford said. “With Wells Fargo, it’s difficult to understand.”
Among big U.S. banks, Charlotte-based Bank of America has detailed its efforts to relocate call center and other roles to the U.S. that interact directly with American-based customers.
According to the bank, the relocating is complete. It brought to the U.S. about 5,000 jobs from places including the Philippines, Mexico and Costa Rica during CEO Brian Moynihan’s tenure. The bank continues to maintain other jobs like information technology outside the U.S., especially in India, to support global businesses and clients.
The Communications Workers of America union has criticized Wells Fargo since the Senate hearing, saying the bank’s recent call-center layoffs in the U.S. continue a trend from 2011 and 2012. At that time, Wells laid off hundreds of call-center workers in states like California, Florida and Pennsylvania, the union said.
Richard Honeycutt, vice president for the union’s Southeast region, told the Observer such layoffs are short-sighted and a major problem for communities.
“It hurts working people who lose good jobs, it hurts communities that need a solid tax base in order to provide important public services, and it hurts customers who are not getting the service they pay for,” Honeycutt said.
Wells Fargo said that, when staffing new positions globally, it follows a rigorous process to ensure it is acting in the best interests of its customers, employees and shareholders.
“As a company that currently operates in 42 countries and territories around the world, we take a thoughtful approach to adding team members to our global workforce as the company focuses on improving our service and operating efficiencies,” the bank said.
Also in the Philippines, Charlotte Observer parent McClatchy maintains call-center operations that handle customer calls for most of the company’s newspapers, including the Observer. A spokeswoman said the operations are constantly under review to provide a high standard of customer service.
Layoffs hit call centers
Across the U.S. this year, Wells Fargo announced a series of layoffs affecting call centers, including one just this week in Bethlehem, Pa. Wells will close that center, where about 460 people are employed.
In a separate announcement in September, the bank said 120 employees would be laid off through closing a reverse-mortgage operation affecting a Fort Mill, S.C., call center. The month before, Wells disclosed plans to close a Vancouver, Wash., call center in a move affecting 72 employees.
Wells Fargo said none of those jobs are being transferred outside the U.S.
The bank said the decision affecting Pennsylvania was made primarily because of a drop in call-center volume. The Fort Mill closure resulted from Wells exiting the servicing of reverse mortgages, while the Vancouver move was in response to fewer foreclosures, Wells said.
The layoffs come as Wells is in the midst of centralizing functions and cutting billions of dollars in costs in the wake of the sales scandal. The bank was fined $185 million to settle claims that employees opened millions of accounts without customer authorization.
In May, Wells’ chief financial officer mentioned the company was looking at moving some work offshore as part of centralization. The bank recently reported having 2,600 fewer employees at the end of the third quarter of this year compared with the second quarter. In Charlotte, Wells has about 24,000 workers, its largest employment hub.
During his exchange with Wells’ CEO, Donnelly pressed him on whether the company had laid off American call-center workers then added people in the same roles in the Philippines.
Sloan acknowledged that Wells had, but said that the bank’s track record is to rehire about 70 to 80 percent of the people affected by such layoffs.
“Why would you in the first place send these jobs to the Philippines if they were being done here?” Donnelly asked.
To best serve customers, Sloan said, “it makes sense to have folks around the world so we can continue to be working through a 24-hour day and not run a night shift, for example, somewhere.”
“Do you think Americans are not capable of working a night shift?” Donnelly asked. “I can show you a whole bunch of folks in my state who work night shifts.”
Even though some U.S. firms have pulled back on overseas call centers, offshoring remains a popular option for many other American companies, according to experts.
“The reason that companies are offshoring is that they are continuing to seek ways of cutting labor costs,” said Rosemary Batt, a professor at Cornell University who has extensively studied call-center practices.
But offshoring can carry risks, especially if the work will be handled by a contractor, Batt said.
Concerns arise about what controls contractors have to ensure customer data is safe, she said. In addition, contractors can be prone to high employee turnover and insufficient worker training, all of which can hurt customer service, she said.
Wells Fargo said its call-center operations in the Philippines are not outsourced but instead manned by Wells employees.
New federal rules would target companies that offshore U.S. call-center jobs, under legislation before Congress. The bill would require, among other things, the Labor Department to disclose all employers that relocate a call center overseas.
Ron Hira, an associate professor at Howard University who has studied offshoring, said a concern is losing U.S. jobs that typically can pay $12 to $14 a hour. Those jobs can also teach important “soft skills” U.S. employers desire and provide a path to higher-level positions, he said.
“And if you offshore the work, that means you can do it remotely,” Hira said. “So why can’t you put it in these Midwest or rural areas that have gone down? These could be good jobs.”