With the stock market crash eight years behind us, it was more than unsettling to learn that Wells Fargo & Co. was caught doing sketchy business practices using their customers’ money. But let’s be honest, if you are just another college student then you probably do not care, and you might even think this has nothing to do with you. But what if you found out that Wells Fargo employees opened up secret accounts in your name, and even made a profit out of it? In short, that is what the bank was caught doing, and as a result it fired about 5,300, or one percent, of its employees. Here is what happened, when it happened, how it happened, and why you should care, even if don’t have millions in the bank.
Sept. 13, 2007– a letter, written by a Wells Fargo employee was sent to CEO John Stumpf, in which the unnamed whistleblower claimed to have reported “unethical (and illegal) activity” nine months prior and had been transferred to another branch because the bank considered their report to be harassment. The employee went on to say that the activity was “widespread and so highly encouraged that it has become a normal sales practice” and that “all attempts to utilize traditional channels to report this information have been met with immediate and lasting retaliation…”
May 5, 2015- Los Angeles City Attorney Michael Feuer filed a lawsuit against Wells Fargo, alleging that the bank “victimized their customers by using pernicious and often illegal sales tactics to maintain high levels of sales of their banking and financial products…As a result, Wells Fargo’s employees have engaged in unfair, unlawful, and fraudulent conduct, including opening customer accounts, and issuing credit cards without authorization.” The suit continues with a longer and more detailed list of actions committed by Wells Fargo employees.
In short, Wells Fargo employees used money from authorized customer accounts to pay for bank fees from unauthorized accounts that they had opened. Customers were then charged fees for the unauthorized activity and even had their credit reports affected when those hidden fees went unpaid. These claims, although surprising, were only a portion of what the lawsuit alleges Wells Fargo did with customers’ accounts. Employees blame high sales quotas and unrealistic sales goals put forth by management as the cause for the opening of these accounts.
Sep. 8, 2016– Wells Fargo is fined $100 million by the Consumer Financial Protection Bureau, as well as an additional $85 million in penalties. The CFPB claimed that Wells Fargo opened around 1.5 million accounts and about 565,000 credit card applications without customers’ knowledge or consent.
Sept. 20, 2016– The U.S. Senate Committee on Banking, Housing, & Urban Affairs conducted a hearing titled, “An Examination of Wells Fargo’s Unauthorized Accounts and the Regulatory Response.” Notably present at the hearing was Massachusetts Senator Elizabeth Warren who has earned a strong reputation for being tough on Wall Street. During a heated moment, Warren brought up Wells Fargo’s reputation of “cross-selling” (the sale of multiple products or services to existing customers), saying directly to Stumpf “cross-selling isn’t about helping customers get what they need. If it was, you wouldn’t have to squeeze your employees so hard to make it happen. No. Cross-selling is all about pumping up Wells’ stock price. Isn’t it?” Stumpf initially denied the allegation but was cut short when Senator Warren produced transcripts from 12 different quarterly earnings calls from 2012 to 2014 where Stumpf, when speaking directly to investors, said in April 2014, “We achieved record retail banking cross-sell of 6.17 products per household.” Before giving her closing statement, Warren grilled Stumpf even further, “you squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket…This is about accountability. You should resign. You should give back the money that you took while this scam was going on and you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission.”
Sept. 20, 2016– Stumpf agrees to give up about $41 million worth of stock awards and go without a salary while an independent investigation is underway within by the company.
Oct. 5, 2016– A search warrant prompting an investigation from the California Department of Justice is served to Wells Fargo, requesting information regarding those affected by the unauthorized activity, as well as those responsible.
Oct. 12, 2016– Stumpf resigns as CEO and chairman of Wells Fargo and is replaced by the bank’s president and COO, Timothy Sloan.
The investigation is ongoing and no charges have been filed yet since information is still surfacing. If you are a Wells Fargo customer and suspect you may have been affected by this, you can log on to the Wells Fargo website to review all open accounts, call their customer service hotline, or see a banker in person for an account review. More refunds to customers are expected to be given out pending the investigation and if you are eligible, no action will be required on your part.