Wells Fargo Bank, N.A., a subsidiary of
Wells Fargo & Company WFC, has been fined a combined $190 million by the California and federal regulators. The bank’s employees were alleged of illegally opening millions of unauthorized accounts to meet their aggressive internal sales goals. Notably, the company neither admitted nor denied the allegations. Violations Committed
It is alleged that Wells Fargo’s employees opened around 1.5 million deposit accounts that were not authorized by the customers. The employees then illegally transferred funds from the existing customer accounts to the new accounts, in order to plump their sales numbers and receive additional compensation. These practices hurt the consumers’ interests as they were sometimes charged for insufficient funds or overdraft fees, because the money was not in their original accounts.
Further, the employees were accused of applying for 565,000 credit cards, without customers’ authorization. As a result, many consumers incurred annual fees, along with finance or interest fees and other charges.
Moreover, debit cards were requested and issued without the consumers’ knowledge or consent and the employees went as far as creating PINs. Also, consumers were enrolled for the bank’s online banking services, without their knowledge or consent.
Penalty in Depth
The San Francisco-based bank will pay $100 million to the Consumer Financial Protection Bureau, the largest in the agency’s history, given the severity of the violations. Further, the bank will pay $35 million to the Office of Comptroller of the Currency and $50 million to the City and County of Los Angeles. In addition, the amount included $5 million in customer remediation.
Wells Fargo fired around 5,300 employees, who acted against the bank’s values and promised to compensate the affected customers. For the same, Wells Fargo refunded $2.6 million to the customers for any charges associated with the products which they may not have requested. Notably, the accounts refunded represented just 1% of the accounts reviewed by a third party consulting firm and refunds averaged $25.
Additionally, Wells Fargo proposes to invest in enhanced team-member training, monitoring and control. Further, it will ensure following stronger performance measures, which are tied to customer satisfaction, loyalty and ethics. Also, the employees will be sending customers a confirmation email within one hour of opening any deposit account and will send an application acknowledgement and decision status letter, after submitting an application for a credit card.
Wells Fargo’s aggressive sales tactics were first disclosed by The Los Angeles Times in 2013. At that time, Los Angeles City’s Attorney Mike Feuer began investigation. That probe led to a lawsuit accusing the bank of high-pressure sales goals that encouraged unfair, illegal and fraudulent conduct, such as issuing unwanted credit cards to customers.
Wells Fargo is still known for setting aggressive sales goals for its employees. Nonetheless, in a statement regarding the current allegations, the bank said, “Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us. 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.”
Currently, Wells Fargo carries a Zacks Rank #3 (Hold).
Other Stocks That Warrant a Look
Some better-ranked stocks in the finance space include Comerica Incorporated (
CMA Quick Quote CMA - Free Report) , Apollo Global Management, LLC APO and Meta Financial Group, Inc. CASH, each sporting a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here. Confidential from Zacks
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