What a pain in the assets!
Federal regulators on Thursday slammed Wells Fargo for operating a years-long scam whereby the bank secretly opened hundreds of thousands of accounts that sucked more than $2.6 million in fees from customers.
The San Francisco bank, led by Chief Executive John Stumpf, paid $185 million to settle charges that, beginning in 2011, it systematically opened unauthorized accounts and credit cards — without the consent or knowledge of customers.
Those illegally opened accounts, which accrued on average of $25 in fees, were opened by bank employees so they could reach sales quotas that would count towards bonuses, according to a consent order from government regulators.
When the bank was first tipped to the scam, it started firing employees involved in the wrongdoing.
So far, 5,300 employees, or about 1 percent of the bank’s payroll, have been axed.
“Our investigation found that since at least 2011, thousands of Wells Fargo employees took part in these illegal acts to enrich themselves by enrolling consumers in a variety of products and services without their knowledge or consent,” Richard Cordray, director of the Consumer Financial Protection Bureau, one of the regulators bringing the action, said in a statement.
The CFPB levied a $100 million fine while the Office of the Comptroller of the Currency fined the bank $35 million, and the Los Angeles city attorney’s office fined Wells $50 million.
The bank, in settling the allegations, didn’t admit or deny any wrongdoing.
Under the scam, after a client walked into a branch and opened a checking account, the local banker would then open a savings account or a credit card that wasn’t asked for, according to a person familiar with the investigation.
In some cases, a banker would use a fake e-mail address to open an online banking account, it was alleged.
The banker would transfer money for a certain amount of time — as little as $25 for perhaps a week or two — which would qualify the bogus account for the sales quota.
Then, the money would be transferred back to the legit account — but not before a monthly maintenance fee was charged.
Some customers were also hit with $35 overdraft charges.
“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,” the bank said in a statement.
While the bank has taken steps to keep bankers from opening up dummy accounts, sales quotas are still “a part” of how bankers are compensated, according to spokesperson Richele Messick.
Many Wells Fargo customers hit with the bogus fees have been paid back.
The bank has set aside $5 million to compensate any customers it hasn’t already paid back.
Wells Fargo shares gained 13 cents in regular trading — but gave back 27 cents in after-hours trading, to $49.90.