Wells Fargo employees have sued the bank alleging they were forced to work unpaid overtime as they tried to meet goals, while bank customers have sued alleging that fake accounts were opened in their names. City Attorney Mike Feuer called the settlement a “major victory for consumers”. Ms. Stevens said she told bank employees she didn’t want the smaller credit line; the bank told her in a February letter she had signed forms allowing it to open the line at a lower amount than she preferred.
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Piper Jaffray analyst Kevin Barker said he does not think the crackdown on Wells Fargo will have much of an impact on others in the industry.
It is a particularly ugly moment for Wells Fargo, one of the few large US banks that have managed to produce consistent profit increases since the financial crisis.
“Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses”, Cordray said in a statement.
One Wells Fargo customer in Northern California, Shahriar Jabbari, had seven additional accounts that he did not consent to, according to a lawsuit he filed against the bank previous year in federal court.
“I think this is unique to Wells Fargo and their particular situation and how hard they push on cross-sell”, he said.
“In 2016, Wells Fargo ranked 7th on the Forbes Magazine Global 2000 list of largest public companies in the world and ranked 27th on the Forbes 500 list of largest companies in the United States, according to Fortune 500 (2016)”.
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.
The scope of the scandal is shocking.
The bank has fired roughly 5,300 people over the unauthorized product sales, the CFPB order says. Because money was removed from customers accounts they were charged for overdraft fees or fees for insufficient funds.
According to that complaint, Wells Fargo employees pushed checking account customers into savings, credit and online accounts that could generate fees.
The CFPB said Wells Fargo will pay “full restitutions to all victims”.
The bank agreed to resolve the allegations without admitting or denying the agencies’ accusations, and said in a statement that it had set aside $5 million for customer remediation. They should never be taken advantage of by their banks. Berkshire Hathaway, the investment firm run legendary investor Warren Buffett, is the company’s biggest shareholder.
The federal Consumer Financial Protection Bureau announced the penalties against the bank after an investigation uncovered rampant illegal activity by thousands of employees. “Every Wells Fargo team member is expected to adhere to the highest possible standards of ethics and business conduct”.
The CFPB declined to explain how it came up with the $100 million penalty figure. The bank hired an independent consultant that reviewed tens of million of accounts from May 2011 through July 2015. But the more troubling aspect, they said, was how the behavior reflected a broader culture inside Wells Fargo’s retail operations.
The CFPB declined to comment on when the investigation began or what sparked it, saying they don’t comment on how they uncover instances like this one. “Based upon that review, we determined that the matter was not material”. That’s exactly what happened to Wells Fargo customers nationwide.
“Consumers must be able to trust their banks”.
Los Angeles officials and the Office of the Comptroller of the Currency were also party to the settlement. About 100,000 customers have received refunds.
“It is outrageous for a bank to use a customer’s private information without permission to open an unwanted account”, L.A. City Attorney Michael Feuer said.
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“How does a bank that is supposed to have robust internal controls permit the creation of over a half-million dummy accounts?” asked Vladeck. As the CFPB notes, end users were impacted by this, and you’d think that complaints would have made it clear that this was a problem much sooner.
