by Dr. Christina Jacqueline Johns
For years after the banking crisis, Wells Fargo went out of its way to present itself as one of the good banks. According to David Dyan, a reporter who writes about Wells Fargo, part of the bank’s media strategy was to promote itself as a safe, customer oriented bank, not involved in pesky old derivatives, just a friendly bank out to provide the best service to customers.
In the last few years, all that has fallen apart.
The Fake Account Scandal.
In 2016, when the reporting first started, it appeared that some 2 million fake bank accounts had been opened for Wells Fargo customers without their knowledge. Not long afterward, the figure being reported was more like 3.5 million. Representatives of the bank were opening additional accounts for existing customers without telling them. After a while, the CEO for Wells Fargo claimed that the problem was just a few bad apples and fired 5,000 lower level employees. (That’s more than a few bad apples by my count). Then, it came to light that these “bad apples” independently were being pressured to open an average of eight bank accounts for every unsuspecting customer that came into the bank. The employees themselves were being threatened with firing if they didn’t meet the quota. On top of the problems caused individuals who wound up with these extra accounts, representatives were using this supposed growth in accounts in order to talk other investors into investing with Wells Fargo. The line was something like this: We’re doing great. See how many accounts we have and we’re expanding every quarter with more and more accounts. The only problem was that the accounts were bogus. So, Wells Fargo was lying to its account holders and also to their investors.
Then, in August of 2017, Wells Fargo was forced to admit that it had earned some $73 million dollars by pushing redundant car insurance on more than 800,000 unsuspecting borrowers. Wells Fargo partners with car dealerships to arrange for car loans. But, when the loans were set up, Wells Fargo added a collision insurance policy to every loan without informing the customers. So, customers were being charged extra in every car payment for insurance they hadn’t taken out and were perhaps already paying for through another insurance company. The charges were being automatically deduced out of their accounts at Wells Fargo. According to a report Wells Fargo itself commissioned, some 800,000 borrowers were affected by these bogus insurance policies. Wells Fargo now is contesting the report it commissioned. Between 2012 and 2017, some 1 million people were affected by unnecessary delinquencies and even repossessions of automobiles because of the scam. According to the New Republic, this caused a quarter-million delinquencies and 25,000 wrongful auto repossessions.
These scandals are just two of the scams operated by Wells Fargo over the years. The company has also been accused of adding extra fees to mortgages and changing the terms of mortgages without informing customers. In other cases, the company was found to have been using investor money to pay legal fees in cases against their own investors. Wells Fargo has been charged with secretly changing loan terms on mortgage borrowers in bankruptcy, and falsifying records so that delays caused by the bank were charged to mortgage applicants.
In 2010 Wells Fargo, along with other banks, was sued for a practice called “debit charge reordering.” This scam was designed to increase the bank’s profits from overdraft charges by rearranging the dates on which charges were recorded. If, for example, a customer had $100 in the bank and wrote three checks in a day, one for $10, one for $15, and one for $125. The bank would reorder the drafts, putting the $125 charge first. Therefore, instead of paying one overdraft payment, the customer would be paying three overdraft payments. All the banks involved in this scandal settled and replayed customers EXCEPT wells Fargo.
Wells Fargo has argued in three court cases that they are not responsible for settling with customers because there is a mandatory arbitration clause that applies to the customer’s agreement with the bank. Wells Fargo is saying that the customers can’t band together to sue them because of this arbitration agreement. Three different judges have told the company that this argument will not stand. The reasoning is that Wells Fargo had the chance to arbitrate with customers, but instead went to court. When the bank saw that the court case was going against them, they then tried to say that they wanted to go back and arbitrate. A fourth ruling is due this month (in the 11th circuit court of appeals) on whether Wells Fargo will be allowed to get away with this legal tactic. In the meantime, Wells Fargo has held on to customer’s money for six years delaying settlement on the case. So, Wells Fargo is essentially operating with an interest free loan from the very people it defrauded.
While all this is going on, I have noticed that Wells Fargo is showing up as a sponsor in numerous arts events, trying to rehabilitate its image.
Friends don’t let friends bank with Wells Fargo.
See: Dayen, David (8/1/2017) “Give Wells Fargo the Corporate Death Penalty.” The New Republic.