Wells Fargo is one of those companies that has always just seemed to be part of the American landscape. For the past 164 years, this iconic American brand has been associated as much with the spirit of American prosperity as with its core business of banking. Even today, the Old West image of the stagecoach can be found on company signage, hearkening to the days of westward expansion.
Until last week, Wells Fargo was considered the nation’s most valuable bank, with market capitalization in the hundreds of billions of dollars and holding nearly $1.7 trillion in assets. But last week, the company’s image was significantly tarnished by a stinging rebuke from the Consumer Financial Protection Bureau.
In its announcement of the findings from a review of Wells Fargo records, the CFPB alleged the company encouraged representatives to create up to 1.5 million phony bank and credit card accounts, allowing Wells Fargo to collect unearned fees and enabling employees to inflate their sales figures so they could take home unwarranted bonuses. In addition, the CFPB charged Wells Fargo with allowing its representatives to submit unauthorized credit applications for “ghost accounts,” which then generated annual fees, interest charges and overdraft-protection charges. Among the alleged nefarious actions were creation of fake personal identification numbers and fabricated emails. Wells Fargo announced last week that it had settled the cases and this week added that all sales goals in retail banking will be eliminated at the end of the year.
“Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us,” the company said in a news release. “Wells Fargo is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request.”
In the settlement, the CFPB will pocket $100 million, with an additional $85 million earmarked for various restitution funds (and a $5 million pool specifically for customer refunds). For its part, Wells Fargo announced it had fired 5,300 employees over the past few years for engaging in questionable behavior and has mandated ethics training.
“Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,” CFPB Director Richard Cordray noted in a news release. “Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed. Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.”
Just this week, with the drop in the company’s valuation, it lost its crown of “nation’s most valuable bank” to rival JPMorgan Chase. And it’s likely this story will continue; several sources report members of Congress are already calling for an accounting of the alleged fraud and whether it had a disproportionate effect on seniors.
So, what does it mean to you, if you’re a Wells Fargo customer? For starters, if you lost money from creation of an unauthorized account, you may already have gotten a refund. Wells Fargo reports it’s already issued $2.6 million in refunds to customers earlier this year. If you haven’t, you should contact the bank to investigate it. Identity theft is another concern on the minds of many who might have been affected. Many experts suggest checking your credit report frequently by visitinghttp://annualcreditreport.com.