Where Wells Fargo went wrong
Wells Fargo is back in the spotlight, but not in the good way. Wells now ranks as the least-respected company in America, according to a June survey of money managers conducted by Barron’s. The Consumer Financial Protection Bureau hit the bank with its biggest fine ever, $100 million. All in all, Wells Fargo was fined $185 million for years of screwing over their customers. How is this broken up? An additional $35 million goes to the Office of the Comptroller of the Currency, while the city and county of Los Angeles gets $50 million. Customers were also refunded $2.5 million.
Employees say they were actually motivated to screw customers by both pressure to increase the number of accounts and incentives that rewarded them for doing so. The fake account mess, combined with ongoing criticism of Wells Fargo's mortgage tactics, has forced the bank to increase their legal defense fund. In fact, Wells Fargo even warned investors that the worst-case scenario could be losses of $1.7 billion "in excess of" what it's already set aside. That's up from an estimate of $1 billion as of August! In light of all their debauchery, let’s dive into where Wells Fargo truly screwed up.
How Wells Fargo has been screwing people over
1) Fraudulent Account Scandal
How mad would you be on a scale of 1 to 10 if you didn’t authorize a bank to create an account for you? Probably over a 10. Wells Fargo opened 3.5 million unauthorized accounts, which is a 70 percent increase over the bank’s initial estimate. The creation of these sham accounts led to lawsuits, a change in their executive lineup and an increase in their internal controls and risk management. This means that they want bank branch workers to focus on customer service, not sales...it’s about time. Though, even that won’t fix their mess. The real sad part is Wells Fargo’s illegal acts haven’t even taken much of a toll on its profits. The fines, penalties and refunds they’ve paid out are small compared to the $11 billion they earned in the first half of this year.
2) Auto Insurance
I really hope you don’t have car loans to pay off at Wells Fargo. More than 800,000 people who took out car loans from Wells Fargo were charged for auto insurance they didn’t need, and some of them are still paying for it. It’s estimated that the bank owed $73 million to wronged customers! People noticed this after checking their statements and realizing that they were paying closer to $400 for their loan, which was supposed to be $250.
3) Mortgage Crisis
Wells Fargo has also been accused of handling mortgages improperly by making unauthorized changes to the loans of borrowers in bankruptcy (which they have denied) and charging customers fees to extend applications that they delayed (an issue Wells said it was looking into). The changes surprised the customers, mostly because they lowered their monthly loan payments. This initially would seem to benefit borrowers, particularly those in bankruptcy, but the changes actually extended the terms of borrowers’ loans by decades. Ie: They would have monthly payments for way longer and would owe the bank much more over time. Tricky, tricky Wells Fargo.
Should I switch from Wells Fargo to something else?
Wells Fargo is trying to cover up scandal after scandal, which is one of the biggest reasons not to trust them with your money. Here’s a couple more reasons though:
- They don’t care about you and provide terrible customer service.
- They will charge you what THEY think is fair. This means obscene fees for everything you do.
- You’re a little fish in their big pond, and they will do whatever it takes to protect them over you. They profit from your misery.
If switching from a big bank to something else is too painful, at the very least do NOT keep your savings there. They give no interest, charge fees, and there are much better options out there.
The real truth is told by Warren E. Buffet’s comment on Wells Fargo (Ironically the bank’s largest shareholder), “There’s never just one cockroach in the kitchen. Once you put a spotlight and start looking at everything, you’re likely to find something additional.” Even Tom Goyda, a spokesman for the bank, couldn’t specifically comment on all of these suits, most likely because they’re working through reviews of past practices and trying to see where they went wrong in the first place.
The question everyone keeps wondering and asking: Is Wells Fargo listening? Something that hasn’t been very public is a group of young immigrants who are suing Wells Fargo for denying them student loans and credit cards. Wells even tried to have the lawsuit tossed, but a federal judge gave the young immigrants the green light. The overall answer to that question though is NOPE. It’s time to make the switch to a bank or savings account that truly cares about you.
If you want to learn more, listen to this podcast review on Wells Fargo by NPR.
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