Wells Fargo Fined $185 Million For Opening Unauthorized Accounts

Wells Fargo Fined $185 Million For Opening Unauthorized Accounts

Wells Fargo & Co. has instructed employees in its US call centers to "temporarily halt cross-selling of financial products to customers," according to news sources, a day after federal regulators fined the bank $185 million for opening more than 2 million unauthorized accounts.

Sen. Jeff Merkley, along with other Democrat legislators, called for an investigation of the bank after the fines were announced. "One lesson we learned from the Great Recession," he said. "Big banks can't be left to police themselves. We need an active watchdog on the beat looking out for us – and that's exactly what we have with the Consumer Financial Protection Bureau (CFPB).

"Without the CFPB on the case,:" he said, "there is no telling how long Wells Fargo could have gotten away with reaching into working Americans' pockets with unauthorized fees. We need a strong, empowered CFPB to patrol Wall Street and hold the big banks accountable when they break the rules and take advantage of working  families." He added that "Wall Street lobbyists and their Republican pals in Congress are once again trying to cripple and defund the CFPB in this year's federal budget."

Merkley then referenced the following from the New York Times: "For years, Wells Fargo employees secretly issued credit cards without a customer's consent. They created fake email accounts to sign up customers for online banking services. They set up sham accounts that customers learned about only after they started  accumulating fees. On Thursday, these illegal banking practices cost Wells Fargo $185 million in fines, including a $100 million penalty from the Consumer Financial Protection Bureau,  the largest such penalty the agency has issued."

According to the CFPB, Wells Fargo's employees secretly opened the unauthorized accounts to hit sales targets and receive bonuses. The company agreed to resolve the allegations without admitting or denying wrongdoing — and said it fired 5,300 employees over the matter. And no one went to jail as a result of this massive scam!

In a scathing attack on John Stumpf when the chairman and CEO of Wells Fargo testified before Congress, Sen. Elizabeth Warren said Stumpf should go to jail for instigating the rip-off of the bank's customers and continuing it even after it was discovered by the company's management in 2011. She noted that Stumpf's personal wealth increased by $200 million during that period as a result of the unauthorized accounts and a corresponding increase in the value of his stock holdings.

UPDATE:

Six former Wells Fargo employees have filed a class action lawsuit in federal court against the bank seeking $7.2 billion or more for workers nationwide who were fired or demoted after refusing to open fake accounts. The lawsuit accuses Wells Fargo of orchestrating a "fraudulent scheme" to boost its stock price that forced employees to "choose between keeping their jobs and opening unauthorized accounts."

The new lawsuit builds on a class action lawsuit that was filed earlier by two former Wells Fargo workers in California, opening it up to the bank's employees around the country. The earlier lawsuit alleges that employees who refused to  take part in the scam were "systematically and routinely  terminated," while those who did open unauthorized accounts were often promoted.

And, according to some former Wells Fargo  employees, the fraudulent tactic was used by the bank much earlier than 2011, when "it was discovered by the company's management."

On October 3, 2016, Wells Fargo CEO Tim Sloan said the company would rehire any workers it fired "inappropriately" for missing sales goals under its previous aggressive sales structure — and new rules would be provided for its workers to prevent the sort of culture that lead to the bank scandal.

John Stumpf resigned as Wells Fargo's chairman and CEO in October five weeks after the bank was fined $185 million — and two days before the bank was to report its third-quarter earnings.

 

For more on Wells Fargo, see Two Major Companies Agree to Resolve Claims in Federal Lawsuits.