Wells Fargo Fires 5,300 For Engaging In Massive Fraud, Creating Over 2 Million Fake Accounts

[Frank Cannon]

http://www.zerohedge.com/news/2016-09-08/wells-fargo-fires-5300-engaging-massive-fraud-creating-over-2-million-fake-accounts

For years we have wondered why Wells Fargo, America's largest mortgage lender, is also Warren Buffett's favorite bank. Now we know why.

On Thursday, Wells Fargo was fined $185 million, (including a $100 million penalty from the Consumer Financial Protection Bureau, the largest penalty the agency has ever issued) for engaging in pervasive fraud over the years which included opening credit cards secretly without a customer’s consent, creating fake email accounts to sign up customers for online banking services, and forcing customers to accumulate late fees on accounts they never even knew they had. Regulators said such illegal sales practices had been going on since at least 2011.

In all, Wells opened 1.5 million bank accounts and "applied" for 565,000 credit cards that were not authorized by their customers.

Wells Fargo told to CNN that it had fired 5,300 employees related to the shady behavior over the last few years. The firings represent about 1% of its workforce and took place over several years.  The fired workers went to far as to create phony PIN numbers and fake email addresses to enroll customers in online banking services, the CFPB said.

How Wells perpetrated fraud is that its employees moved funds from customers' existing accounts into newly-created accounts without their knowledge or consent, regulators say. The CFPB described this practice as "widespread" and led to customers being charged for insufficient funds or overdraft fees, because the money was not in their original accounts. Additionally, Wells Fargo employees also submitted applications for 565,443 credit card accounts without their knowledge or consent, the CFPB said the analysis found. Many customers who had unauthorized credit cards opened in their names were hit by annual fees, interest charges and other fees.

According to the NYT, regulators said the bank’s employees had been motivated to open the unauthorized accounts by compensation policies that rewarded them for drumming up new business. Many current and former Wells employees told regulators they had felt extreme pressure to expand the number of new accounts at the bank.

And, since it is US government policy never to send a banker to prison, they thought that engaging in criminal behavior was not such a bad idea.

Federal banking regulators said the practices reflected serious flaws in the internal culture and oversight at Wells Fargo, one of the nation’s largest banks.

"Today's action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences," said CFPB Director Richard Cordray. He added that “unchecked incentives can lead to serious consumer harm, and that is what happened here."

"Consumers must be able to trust their banks. They should never be taken advantage of," said Mike Feuer, the Los Angeles City Attorney who joined the settlement.

On its behalf Wells fargo issued a statement saying it “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,” the bank said in a statement adding that "at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action."

As the NYT puts it, "this is an ugly moment for Wells Fargo, one of the few large American banks that have managed to produce consistent profit increases since the financial crisis." Now we know one of the reasons why.

As CNN redundantly adds, "the scope of the scandal is shocking."

And since nobody will go to prison, in a few months we will read another such "shocking scandal" perpetrated by another bailed-out bank.

[Smokin Joe]

http://www.zerohedge.com/news/2016-09-08/wells-fargo-fires-5300-engaging-massive-fraud-creating-over-2-million-fake-accounts

I had heard they were a bank to avoid many years ago. When Wells Fargo bought out a bank I had an account in, they sent me a statement and a credit card. I cut up the card, called them up and told them to send me a check for my balance in the account. I told them I did not want to do business with them. After cutting up a couple more cards, and a few more phone calls, I finally got my money and got shucked of them.

[Frank Cannon]

I had heard they were a bank to avoid many years ago. When Wells Fargo bought out a bank I had an account in, they sent me a statement and a credit card. I cut up the card, called them up and told them to send me a check for my balance in the account. I told them I did not want to do business with them. After cutting up a couple more cards, and a few more phone calls, I finally got my money and got shucked of them.

Had issues with them after they took over Wachovia. A bunch of my deadbeat tenants would send me checks from there and I would go to the local branch to cash them to avoid bounced check fees at my bank. As soon a Wells took over they were a total nightmare to deal with for the same thing I was doing there for years....cashing their customers checks. Adding insult to injury they would pester the hell out of me to bring my accounts to them. Soon after the nonsense started I sent a letter that I was only accepting Money Orders for rent from these losers. Lifes too short to get hassled at a bank monthly.

[Neverdul]

I don’t understand how the WF employees who did this won’t or shouldn’t be criminally prosecuted.  It sounds to me that they committed bank fraud by opening unauthorized accounts and making unauthorized transfers of funds to those accounts.


Not only could opening credit card accounts and lines of credit have a negative effect on some if not many customer’s credit ratings, but in creating fake email accounts and PIN numbers, misusing their customer’s confidential personal information and even forging customers’ signatures to do so, sounds like they were setting the customers up for possible identity fraud if not for outright theft. 


Pressure to meet sales quotas, earn bonuses and or even keeping their jobs, they must have known this was illegal, as did the managers and executives who knew this was going on and turned a blind eye to it. They should all be criminally prosecuted IMO.  I would not work for nor continue to work for a company that encouraged or rewarded me for committing crimes. 


FWIW I did once quit a job as a bookkeeper in charge of billing for a commercial HVAC company after a month and I became a whistle blower when I learned they were padding and submitting fraudulent bills on a local government contract, after the owner freely admitted it to me and ordered me to inflate work hours and OT and submit fake invoices for materials that were never used on the job and submit fraudulent bills, and he threated to fire me (and worse, yes, he threated to physically harm me) if I didn’t comply. After I quit, he also refused to pay the wages I had already earned, including OT until I contacted the MD Department of Labor.


While I was never called to testify (and I wasn’t the only one who blew the whistle and was prepared to testify against him including several service technicians who also had been told to inflate hours and had also not been paid for their full wages and OT), he still ended up going to jail on a plea deal to a slightly reduced charge.



Fortunately, I quickly found a much better job with a reputable company and for more money and better benefits, but even if I hadn’t, I would have still been glad to have done what I did.  I was not going to be bullied and threatened into being complicit in committing a crime.



http://www.forbes.com/sites/maggiemcgrath/2016/09/08/wells-fargo-fined-185-million-for-opening-accounts-without-customers-knowledge/#3c08512e5d7a

The shady consumer practices didn’t end at unauthorized debit and credit card accounts: consumers also found that unauthorized lines of credit were opened in their names. FORBES contributor Micheline Maynard reports that this happened to her:

https://twitter.com/MickiMaynard/status/773929102235537408?ref_src=twsrc%5Etfw


http://www.heraldnet.com/business/wells-fargo-to-pay-185-million-in-fake-account-allegations/

The Times’ 2013 story, based on court records and interviews with dozens of former and current Wells Fargo employees, reported that workers opened duplicate accounts, ordered credit cards for customers who did not ask for them and even forged customers’ signatures.

In many cases, customers say they’ve had to pay fees related to accounts they never opened.

In a more extreme case, Mexican pop star Ana Barbara this summer sued Wells Fargo, saying an employee opened up accounts without her knowledge then spent more than $400,000 in her name.

I understand that WF is paying refunds to those customers who incurred fees including overdraft fees because of these unauthorized accounts, but IMO that is not enough.  WF should also pay for independent credit monitoring services and any costs incurred to clean up their credit reports.

And those employees who received bonuses as a result of opening these bogus accounts should be forced to repay those bonuses into a fund that should then be distributed to all customers who had unauthorized accounts opened in their names.

As to credit monitoring, it is not a bad idea although some may be better than others. FWIW I have a Capital One credit card and while it is not full credit monitoring service, I get a free monthly report and can log in anytime to see any changes to my credit score (TransUnion) and it alerts me every time a credit inquiry is made or when a new account is opened in my name. It doesn’t give me full details or full access to my full TransUnion credit report, but is enough to see if any fraudulent activity, at least as reported by TransUnion, has taken place.  And you don’t have to be a Capital One customer to sign up for it.

https://www.nerdwallet.com/blog/credit-cards/capital-one-creditwise-free-credit-scores-everyone-non-cardholders/

And everyone should order their free annual credit reports, but use this one and be aware of the scam sites:
 
https://www.consumer.ftc.gov/articles/0155-free-credit-reports

I also have alerts set up on both of my credit cards that notify me by email and txt every time a purchase is made no matter how small the amount. I can then sign into my account to see the details of the purchase. (Although this would not help me if a CC account was fraudulently opened in my name using a fake email address which is why credit monitoring is important).

I sometimes use my CC to purchase gas or pay for groceries and other purchases because I earn points that I can redeem for airfare miles or get cash back or can apply as a credit against my balance which I pay off in full each month.

I am amazed how quickly I get these notices. I’ve been at the gas pump and by the time I get back into my car, see that I already have received a txt message on my phone as to the purchase I just made.  Same with purchases at the grocery store – I’ve often heard the txt alert on my cell phone go off even before all my groceries have been bagged.

I once, stupidly, signed up for a magazine subscription for several magazines sold through my nephew’s school as a fund raiser that had an automatic subscription renewal. But even after I contacted them to end the subscriptions after the second year, the next year they charged my credit card again, and even for some magazines I was no longer receiving and for one that I had never ordered nor had ever received.

I called my credit card company (Barclay’s) and the rep was great in helping me resolve; he got the magazine subscription service on the phone with us, I provided the date, the name of the person I spoke to and the confirmation number from the subscription service for the cancellation and I got a full credit back on my CC in less than a week.  The rep at the CC company was really great and was US based (in North Carolina as I recall) and didn’t have a foreign accent, and he told me, after the magazine subscription rep got off the call, that he had had many and customers who he helped who had problems with this very same subscription service and told me to call back immediately if they ever charged my CC again.

[Restored]

The people who should be fired are the marketing people who came up with the plan that pushed employees to promote these services. They even punish employees who don't meet a quota. It creates a "The ends justifies the means" mentality that leads to fraud. 

[EdJames]

This is outrageous.

[Frank Cannon]

I don’t understand how the WF employees who did this won’t or shouldn’t be criminally prosecuted.  It sounds to me that they committed bank fraud by opening unauthorized accounts and making unauthorized transfers of funds to those accounts.

Silly person. Bankers don't go to jail anymore. They are just fined and the issue is brushed under the rug.

[IsailedawayfromFR]

I had heard they were a bank to avoid many years ago. When Wells Fargo bought out a bank I had an account in, they sent me a statement and a credit card. I cut up the card, called them up and told them to send me a check for my balance in the account. I told them I did not want to do business with them. After cutting up a couple more cards, and a few more phone calls, I finally got my money and got shucked of them.

Wells Fargo was a premier company in the book by Jim Collins "Built to Last".  These were 18 exceptional companies that historically outperformed others due to a durable, long lasting structure. 

It is so sad to see such an Enron example come out of WF.