from the how-do-you-miss-that dept
This story is crazy. Late yesterday it was revealed that banking giant Wells Fargo had to fire 5,300 employees over a massive scam in which those employees created over 2 million fake accounts to stuff with fees in order to meet their quarterly numbers. The Consumer Financial Protection Bureau also fined the company $185 million ($100 million to the CFPB, $35 million to the Office of the Comptroller of the Currency and another $50 million to Los Angeles). Oh and it needs to pay back around $5 million to the customers it screwed over. The CFPB provides some crazy details:
accounts and transferring funds without authorization: According to the
bank’s own analysis, employees opened roughly 1.5 million deposit accounts that
may not have been authorized by consumers. Employees then transferred funds
from consumers’ authorized accounts to temporarily fund the new, unauthorized
accounts. This widespread practice gave the employees credit for opening the
new accounts, allowing them to earn additional compensation and to meet the
bank’s sales goals. Consumers, in turn, were sometimes harmed because the bank
charged them for insufficient funds or overdraft fees because the money was not
in their original accounts.
credit card accounts without authorization: According to the bank’s own analysis, Wells Fargo employees applied for
roughly 565,000 credit card accounts that may not have been authorized by
consumers. On those unauthorized credit cards, many consumers incurred annual
fees, as well as associated finance or interest charges and other fees.
activating debit cards without authorization: Wells Fargo employees requested and issued debit cards
without consumers’ knowledge or consent, going so far as to create PINs without
email addresses to enroll consumers in online-banking services: Wells Fargo employees created phony email addresses not
belonging to consumers to enroll them in online-banking services without their
knowledge or consent.
The thing is, if 5,300 employees were a part of this, this was not some random scam. This was a bank-approved plan to goose their numbers. It seems like among the 5,300 employees, management should be in serious trouble as well. What’s really astounding about all of this is that it took this long for the practice to come to light. As the CFPB notes, end users were impacted by this, and you’d think that complaints would have made it clear that this was a problem much sooner. Or is that people are just so used to getting screwed by their bank that they let it slide? The CNN report notes that Los Angeles had sued Wells Fargo over this practice last year (hence LA being a part of the settlement fines), but having such a widespread scam going on is somewhat astounding.
And, of course, it raises questions about what other banks are doing similar things as well. We’ve seen this kind of activity in the telco space at times with cramming, but that was generally third party scammers, where the telcos just looked the other way. This was full-time Wells Fargo employees doing the scam itself, and the bank apparently either encouraging it or just looking the other way from upper management.