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Wells Fargo Fined $185 Million For Creating Over 1 Million Fake Accounts
Banking regulators said the widespread nature of the illegal behavior showed that the bank lacked the necessary controls and oversight of its employees.
“Today’s action should serve notice to the entire industry that financial incentive programmes, if not monitored carefully, carry serious risks that can have serious legal consequences”, CFPB Director Richard Cordray said. Wells Fargo has agreed to refund about US$2.6 million in fees that may have been inappropriately charged.
The San Francisco-based bank will also pay $50m to the City of Los Angeles, which had filed suit previous year, accusing the bank of pressuring employees into fraudulent behavior, such as opening fictitious accounts.
Money was transferred from a customer’s account into the new accounts. “And any consumer should be outraged by that conduct”. You may hold Wells Fargo shares indirectly through index funds or actively managed stock funds in your 401 (k) or personal accounts.
In a statement, the company said the settlements were reached to put the matter behind it. “We regret and take responsibility for any instances where customers may have received a product that they did not request”. Also, the employees will be sending customers a confirmation email within one hour of opening any deposit account and will send an application acknowledgement and decision status letter, after submitting an application for a credit card. The bank, the nation’s largest by market value, would not comment on the “levels of leadership” involved in the firings, but bank spokeswoman Mary Eshet said “both managers and team members were affected”.
Already, Wells Fargo officials said the bank has hired an outside firm that has reviewed customer accounts looking for bogus accounts and that the bank has paid $2.6 million in refunds so far. Wells Fargo has earned a reputation on Wall Street as a tightly run ship that avoided numerous missteps of the mortgage crisis because it took fewer risks than many of its competitors.
But the nearly $200 million fine won’t come out of the pockets of wealthy bank executives who established the aggressive sales goals that led to widespread fraud. In short, the CFPB fined Wells Fargo for creating an incentivized culture that not only permitted such abuses to occur, but tacitly encouraged it.
In July, the bank named Mary Mack, a Charlotte-based former Wachovia executive, to lead its community banking group, succeeding Carrie Tolstedt. She said about two months passed before the bank agreed to close the $15,000 credit line. There were monthly credit goals, Ms. Hall said, and she often referred customers to bankers who wanted to sell products that are more profitable than a standard checking account. Most of our customers are current customers. The bank has also used slogans like “Eight is Great” to further emphasize its cross-selling push. The strategy is at the core of modern-day banking: Rather than spend too much time and money recruiting new customers, sell existing customers on new products. But, they said, Wells Fargo failed to monitor implementation of its compensation incentive programs with adequate care. For bundling, staff would tell customers that certain products were only available as a package with other ones such as additional accounts, insurance or retirement plans, according to the 2015 complaint.
1 Comment on this Post
Where are the new banking jobs. There should be a huge hiring spree at Wells Fargo to fill the void. Seriously, Wells Fargo just fires 5,300 over fraud, that’s a lot of bad people in one place. This bank needs to be chastised with sanctions. Wells Fargo needs some new horses to pull the aging stagecoach.
Too many people have been hurt by Wells Fargo.