Wells Fargo Consumer Fraud Scandal: Bank Pays Big Fine for Fake Accounts

Wells Fargo, one of the largest banks in the nation, is at the center of a massive scandal in which employees opened nearly two million secret, unauthorized accounts in customers’ names in order to meet sales quotas and boost sales numbers. The company has confirmed that it’s fired 5,300 employees in recent years over the tactic, and according to CNNMoney, the scandal was pervasive and creative.

The bank agreed to pay $185 million in fines to the U.S. Consumer Financial Protection Bureau, a federal watchdog for consumers rights, along with $5 million to refund customers.

Phony Accounts and Real Fees

Employees created phony PIN numbers and fake email addresses in order to enroll customers in banking services and meet sales targets, according to the U.S. Consumer Financial Protection Bureau, a federal watchdog for consumers rights.

The Wells Fargo workers moved funds from customers’ existing accounts into newly-created ones without their consent or knowledge, according to the CFPB, which has described the practice as “widespread.” This resulted in customers getting hit with charges for insufficient funds and overdraft fees, because the employees’ scheme left the accounts without enough money to cover transactions, according to CNN.

To make matters worse, the employees signed up customers for credit card accounts without their knowledge or permission. They submitted applications for more than 565,000 people and ended up incurring more than $400,000 in fees for those customers because of it.

LA Lawsuit Said Wells Fargo Knew About It

The seeds of the probe date back to May 2015, when Los Angeles County City Attorney Mike Feuer filed a class action against Wells Fargo. After he filed that suit, his office fielded more than 1,000 calls and emails from customers, and current and former bank employees, over the allegations.

The lawsuit claimed, among other things, that Wells Fargo sets “unreachable” sales quotas for the number of accounts and other financial services its employees must sell. For instance, Wells Fargo touts that its customers typically hold six different accounts or services with the bank and recently announced a new sales initiative to increase this number to eight per customer, according to the suit.

To ensure that employees are meeting these quotas, management allegedly meets with employees four times each day to discuss the number of accounts or services they’ve sold. Those who do not meet their quotas are allegedly reprimanded or told to “do whatever it takes” to open more accounts and sell more services.

In addition to paying the CFPB fine and restitution, Wells Fargo executives issued a public apology. The bank also said it will change its business practices, according to CNN.

In the aftermath of the revelations, Wells Fargo came under scrutiny from eight U.S. Senators led by Elizabeth Warren, D-Massachusetts, who alleged that amid all of the activity the bank violated employees’ right to overtime pay. The senators’ letter goes on to say that employees who did not meet their quotas had to work “mandated hours of unpaid overtime,” and faced various forms of harassment.

If these claims are substantiated, Wells Fargo will have violated the Fair Labor Standards Act because it did not pay its employees overtime.

By Staff

Writer

comments