Last week regulators at the Consumer Financial Protection Bureau (CFPB) dropped a bombshell that surely shocked anyone with a bank account at Wells Fargo. According to the CFPB, employees at the bank created more than 1.5 million phony accounts over the years in order to fraudulently reach sales targets and earn fees. This “widespread” practice resulted in the recent firing of approximately 5,300 Wells Fargo employees. Regulators also hit the bank with a fine of $185 million along with $5 million in customer refunds.
The scam centered on employees moving money from customers’ existing accounts into newly created accounts of which they had no knowledge. Wells Fargo then charged these unfortunate individuals for overdraft fees and insufficient funds since their original accounts had been drained. Unscrupulous employees at the bank also submitted applications for more than 500,000 credit cards without customers’ consent, resulting in more than $400,000 worth of fees.
Customers as well as industry observers are furious at the bank for these fraudulent practices. “How does a bank that is supposed to have robust internal controls permit the creation of over a half-million dummy accounts?” said David Vladeck, a consumer protection advocate and law professor at Georgetown University. “If I were a Wells Fargo customer, and fortunately I am not, I’d think seriously about finding a new bank.” Along with a nearly $200 million fine, Wells Fargo must also change its internal oversight procedures and sales strategies. While their punishment appears to be tough, others feel like the $250 billion financial institution got off light. “One wonders whether the penalty is enough,” said Vladeck. “It sounds like a big number, but for a bank the size of Wells Fargo, it isn’t really.”
- Should Wells Fargo employees who fraudulently set up dummy accounts face criminal charges?
- Did regulators penalize Wells Fargo appropriately or should they have punished the bank further?