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Fraudulent accounts, Public Deceit, Indiscriminate Charges, Perjury, Non-disclosure/Manipulated Balance Sheets
For more than a decade, Wells Fargo, one of the largest banks in the United States, defrauded customers out of millions of dollars and damaged their credit scores by setting up millions of bank accounts, credit card accounts, and banking services without customers’ knowledge or consent.
While much of the fake account scandal was unfolding, the public lacked a government watchdog dedicated to policing financial products and services.
Affected consumers have settled class action litigation against Wells Fargo that has resulted in tens of millions of dollars of restitution. Other lawsuits are still pending.
Wells Fargo has tried to enforce the forced arbitration clauses in the victims’ consumer contracts, which has likely undermined victims’ pursuit of civil justice in the cases that have already settled and may have a similar effect in pending cases.
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.
In court papers, prosecutors described a pressure-cooker environment at the bank, where low-level employees were squeezed tighter and tighter each year by sales goals that senior executives methodically raised, ignoring signs that they were unrealistic. The few employees and managers who did meet sales goals — by any means — were held up as examples for the rest of the work force to follow.
“This case illustrates a complete failure of leadership at multiple levels within the bank,” Nick Hanna, U.S. attorney for the Central District of California, said in a statement. “Wells Fargo traded its hard-earned reputation for short-term profits, and harmed untold numbers of customers along the way.”
Now the bank is grappling with the lingering consequences. Part of the deal, which includes a settlement with the Securities and Exchange Commission, is a deferred prosecution agreement, a pact that could expose the bank to charges if it engages in new criminal activity.
As part of its agreement with the S.E.C., the bank will set up a $500 million fund to compensate investors who suffered when Wells Fargo failed to inform them that its community banking business was not as strong as the fake accounts made it seem. The money is included in the $3 billion settlement total.
During the final five years of abuse, the bank quietly fired thousands of employees for falsifying records in response to customer complaints, according to court filings, and disciplined tens of thousands more.
The practices covered by the settlement — which includes an admission by Wells Fargo that it falsified banking records and harmed customers’ credit ratings — are not the only misbehaviour the bank has revealed since 2016. Since the allegations came to light in a settlement with California authorities and the Consumer Financial Protection Bureau, the bank has also admitted it charged mortgage customers unnecessary fees and forced auto loan borrowers to buy insurance they did not need.
In the filings, prosecutors described how, even after some Wells Fargo executives tried to curb the sales abuses, the bank hid the problem from investors by changing its public descriptions of its sales practices over several years. The intent was to be clearer about the limitations of the bank’s strategy, known as “cross-selling,” without tipping investors off to the problems that senior executives had uncovered, the filings said.
In 2015, the bank developed a new way to calculate the volume of accounts it was opening for customers, noting whether the accounts were used or simply sat dormant. But it never released the figures produced by this new method, “in part because of concerns raised by Executive A and others that its release would cause investors to ask questions about Wells Fargo’s historical sales practices.”
The $3 billion penalty, while large, is not record breaking. In 2015, a judge ordered BNP Paribas to pay nearly $9 billion for sanctions violations.
This new fine is not even the largest against Wells Fargo. In 2012, when the country’s five largest banks paid a total of $26 billion to state and federal authorities to settle investigations into their mortgage lending practices in the years leading up to the 2008 financial crisis, Wells Fargo’s portion was $5.35 billion. Including the latest penalty, the bank has paid more than $18 billion in fines for misconduct since the financial crisis.
On to the next one; Access Bank.
Ojelabi, the publisher of Freelanews, is an award winning and professionally trained mass communicator and a recipient of the D9112 Superstar Icon Award, who writes ruthlessly about pop culture, religion, politics and entertainment.
