Wells Fargo Illegal Accounts Scandal
Banks have worked long and hard to re-establish their reputations after the financial meltdown of nearly a decade ago. Some banks had less to do with it than others and many of the worst offenders are no longer around, but there is no doubt that the entire financial system was shaken by bad decisions made by a handful of financial institutions.
At the core, we want to trust the companies we bank with. We want to feel good about depositing money with them and feel good about our overall relationship. I used to work for a bank writing mortgage loans and know how personal that process is. When people would feel good about the bank and the loan then everything would go smoothly. If they began to feel uneasy, then things became more complicated.
Over 2 Million Phony Accounts
Well, what if you were to find out that employees at your bank opened up unauthorized accounts in your name? That is what happened millions of times at Wells Fargo. Today a settlement was announced where the bank is being fined $185 million for infractions that include, “Opening up roughly 1.5 million deposit accounts that may not have been authorized by consumers.”
The Consumer Financial Protection Bureau states in their release that employees would transfer money from a consumer’s legitimate account in order to receive credit for opening the new account. This helped the bank meet sales goals, but often consumers would get hit with fees since the money wasn’t in the original account where it was supposed to be.
In addition to the 1.5 million deposit accounts, employees opened up about 565,000 credit card accounts that may not have been authorized by consumers. As you may have guessed, consumers unknowingly accrued finance and interest charges on these accounts and yes employees received compensation for opening them.
The CFPB also found that employees issued debit cards and even created PINs without consumers having any knowledge of what was going on. Employees also created fake email addresses to enroll consumers in online banking. My guess is there was some sort of bonus for that as well?!?
According to the Los Angeles Times, Wells Fargo has agreed to pay up to $185 million in fines. $100 million goes to the CFPB (their largest fine issued to date), with $35 million going to the Office of the Comptroller and another $50 million going to local officials. The company is also expected to pay up to $5 million in restitution to consumers who were harmed by these practices.
In addition to monetary penalties, Wells Fargo has been ordered by the CFPB to hire an independent consultant to review its procedures. According to the CFPB, “Recommendations may include requiring employees to undergo ethical-sales training and reviewing the bank’s performance measurements and sales goals to make sure they are consistent with preventing improper sales practices.”
Wells Fargo Fires 1% of Workforce
Finally, while the company has not admitted fault and has said this practice was not widespread, they did issue an apology to consumers. Additionally, they have fired 5,300 employees for engaging in shady behavior according to CNN Money. To put that into perspective, the firings represent about 1% of Wells Fargo’s entire workforce. I would call that fairly widespread.
When companies push their employees to perform and don’t implement safeguards to protect customers, you get results like this. Remember, while the higher ups at Wells Fargo most likely didn’t know what was going on, they benefited from these inflated sales numbers which is why they pushed for them in the first place. This is just my opinion, but if I had my personal or business accounts with Wells Fargo, I would probably be considering a new place to move my money.