Last year, L.A. municipality filed a lawsuit against Wells Fargo for allegedly opening phony accounts just to hit unrealistic sales quotas. On Thursday, the banking giant said it would pay the city $185 million, and confirmed 5,300 employees lost their jobs.
Additionally, the bank agreed to pay an extra $5 million for a program to “remediate” customers. The agreement occurred between Wells, on the one side, and the city’s Consumer Financial Protection Bureau (CFPB), attorney office, and the LA’s Comptroller of the Currency, on the other side.
Wells Fargo admitted that its employees created fake bank accounts without their customers’ notice. Plus, they demanded bogus fees for the unauthorized operations.
The Investigation’s Findings
The CFPB was more specific on the controversial sales practices at the bank in a Thursday report. The agency’s investigators found that ever since 2011, the bank’s workers have created fake deposit accounts on behalf of their clients. Next, they transferred funds from other accounts to these accounts.
Plus, they filed credit and debit card applications on behalf of unknowing customers and enrolled them in banking services they had not requested. In these operations, Wells workers even created fake email accounts on behalf of clients.
In some cases, bank employees opened credit lines customers never requested and used consumer data without prior approval.
Regulators found that more than 1.5 million deposit accounts were fraudulently created. Of these, 85,000 generated $2 million in phony fees. CFPB also found that Wells workers submitted more than 560,000 credit card applications which generated about $400,000 in fees.
Regulators explained that Wells employees wouldn’t have resorted to these tactics if it hadn’t been for an incentive-compensation program. The CFPB criticized employees for breaking the trust in America’s banking system. The agency’s director Richard Cordray underscored that the methods are clearly abusive and illegal under the federal law.
Wells Fargo first came under fire in 2013, when a L.A. Times report revealed the shady practices. The newspaper found that the financial institution pressured its employees into reaching unrealistic sales targets to please investors.
In 2013, Wells Fargo was the bank with the largest amount of add-on products sold to its clients. But the report spurred an investigation in 2015. The bank’s ex-CFO said he was not aware of a burdening “sales culture” within his organization.
But in 2014, the bank’s CEO was rather blunt on the issue, saying he won’t be satisfied until every single “creditworthy” customer would carry one of the bank’s credit cards.
Thousands of Employees Sacked
The L.A. attorney’s office disclosed this week that 5,300 Wells workers lost their jobs in the wake of the investigation. In a recent statement, Wells said it was taking responsibility for the instances customers were forced into a service they did not want.
Reportedly, the bank refunded $2.6 million worth of bogus fees to its customers after a third-party review. Additionally, it confirmed that more than 5,000 employees involved in the scandal were fired between 2011 and 2016.
On the other hand, some former employees contacted the media and told their version of the story. Reportedly, they opened the phony accounts and credit lines in order to survive. One of them even said that saying that they did it “under pressure” was an understatement.
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