24 February, 2020
Ahmad E. Hamid
The Wells Fargo account fraud scandal is an ongoing controversy brought about by the creation of millions of fraudulent savings and checking accounts on behalf of Wells Fargo clients without their consent. News of the fraud became widely known in late 2016 after various regulatory bodies, including the United States Consumer Financial Protection Bureau (CFPB), fined the company a combined US $185 million as a result of the illegal activity. The company faced additional civil and criminal suits reaching an estimated $2.7 billion by the end of 2018.
Wells Fargo clients began to notice the fraud after being charged unanticipated fees and receiving unexpected credit or debit cards or lines of credit. Initial reports blamed individual Wells Fargo branch workers and managers for the problem, as well as sales incentives associated with selling multiple “solutions” or financial products. This blame was later shifted to a top-down pressure from higher-level management to open as many accounts as possible through cross-selling.
recently, the New York Times announced that this month Wells Fargo has come to
a settlement with federal prosecutors and the Securities and Exchange Commission
after abusing their customers. The Justic Department announced on Friday that
Wells Fargo has agreed to pay $3 billion over a 14-year period to settle criminal
charges and civil action stemming from its illegal acts.
As of March 29, 2019, Wells Fargo has a market capitalization of $222.96 billion and is the fourth-largest bank in the United States, thus the $3 billion settlement is just slightly over 1% of their worth.
Michael D. Granston, deputy assistant attorney general with the Department of Justice’s Civil Division, said both customers and competitors were harmed by the bank’s actions. He was quoted in saying “This settlement holds Wells Fargo accountable for tolerating fraudulent conduct that is remarkable both for its duration and scope, and for its blatant disregard of customer’s private information,” Granston said in a written statement.
From 2002 to 2016, employees used fraud to meet impossible sales goals. They opened millions of accounts in customers’ names without their knowledge, signed unwitting account holders up for credit cards and bill payment programs, created fake personal identification numbers, forged signatures and even secretly transferred customers’ money.
I personally believe the fine should be seen as only a slap on the wrist and excuses behavior that says you are allowed to defraud Americans and abuse employees with unrealistic expectations. The bank has not been given just punishment for their actions and need to be held accountable.