The Consumer Financial Protection Bureau fined Wells Fargo $100 million when a third-party consulting firm discovered that more than five thousand of their employees had opened 1.5 million deposit and 565,000 credit card accounts using customer credentials to boost their sales and earn compensation.
Without the authorization of their customers, these employees would transfer funds from customer's real accounts to the fake new ones, draining the customer's real bank account in the process and leaving them with overdraft fees. Many of these employees were also caught issuing and activating debit cards, creating PIN numbers for these accounts, and signing up for online banking programs using fake email addresses using customer information, all without the customer's consent.
In response, Wells Fargo issued refunds for fees to any affected customers to the tune of $2.6 million, with an average of about $25 per customer. In addition to the fine from the CFPB and customer refunds, Wells Fargo has to pay the City and County of Los Angeles $50 million, and the Office of the Comptroller of the Currency $35 million. In response to their employees' actions, Wells Fargo released a statement on their website electing to impose "enhanced team-member training," further monitoring of employee activities and behavior, and a refocus on performance goals based on customer satisfaction rather than sales figures.
|Source: The Wall Street Journal|
Wells Fargo's History of Success and Excess
Since the early 2000s, Wales Fargo had built its success on the back of cross-selling - selling related products and services to one customer - and have found themselves as one of the most profitable and successful banks in the United States.
High-Pressure Work Culture Led to Desperate Employees Looking for One More Sale
Employees at Wells Fargo were encouraged by their district managers to increase their sales by any means necessary, to meet seemingly impossible monthly targets, all against the wishes of regional executives. Meeting these seemingly impossible sales targets would often offer lucrative rewards for employees and their managers alike, with bankers earning a possible bonus of up to $2,000 per quarter, while district managers could see bonuses of up to $20,000 per year.
This led to managers and employees alike gunning for sales, using any means necessary. These employees were told to try to sell Wells Fargo products at bus stops and retirement homes, were asked to open accounts for friends and family members, and were mailing activated credit cards out to wealthy customers without their consent.
Despite repeated investigations by the Los Angeles City Attorney Michael Feuer and the Office of the Comptroller of the Currency and regional executives stressing the importance of making legitimate sales, district managers and their employees continued to chase after fraudulent sales,