Amid the excitement of fall activities and sports, bunched in with the consternation of the presidential race, we finally saw Congress come together last week in an effort to get something done.
Pass a new law? No.
Provide some sort of leadership? Not really.
But they did provide some much-needed fire-and-brimstone to the Wells Fargo Bank Heist.
“Congratulations, sir,” a Republican senator told Wells Fargo CEO John Stumpf, “you’ve done what few others have accomplished. You have united Republicans and Democrats on the committee against you.”
So what did Wells Fargo do that was so bad?
Tribune cartoonist Darkow explained it best in a Saturday cartoon in which the stage coach, labeled “Wells Fargo” was holding up the bad guy riding in on a horse with his black hat.
“Gimme yer dough,” is the Wells Fargo refrain. How, exactly, did Wells Fargo produce this massive ripoff of their customers?
Turns out, it was not that complicated.
Instead of a difficult financial scheme along the lines of Bernie Madoff or Lehman Brothers’ mortgage equities debacle, Well Fargo took the easy route.
Step 1: Set up aggressive sales goals for your employees.
Step 2: Have those employees make up new Email addresses for current customers, then, open accounts for them and every member of their family as well as acquaintances.
Step 3: New accounts – credit cards are popular for this – without those customers’ knowledge – could lead to more new accounts. Eight accounts per customer was the Wells Fargo goal.
“Simple” is one way to describe this sales plan. Another word would be “dishonest.” We could also use illegal, unethical and reprehensible.
What was the cost to those who had credit cards or accounts opened for them without their knowledge? More than one Ashland banker gave me a short answer to that question: “We will never know.”
What happens if – and when – a customer’s credit score is affected by Wells Fargo’s cross selling technique? The rate they pay for a home loan, a car loan, a boat loan – any loan – goes up by a few measly percentage points. All told, the damage is likely in the tens of millions of dollars.
After five years of investigating this practice, what was the fine for Wells Fargo? $182 million.
What was the Well Fargo posted profit last year?
That is astounding.
CEO Stumpf told the Congressional committee that he took responsibility and that approximately 5,300 jobs have been terminated over the past five years for these practices. In other words, “We knew this was happening, caught some people and terminated them – but never bothered telling the public and didn’t change our sales management direction.”
I don’t know which is more absurd: That Well Fargo would conduct this ripoff or that investigators and the U.S. Government would discover this and simply slap a small fine on them.
There will be no jail time for Wells Fargo executives or management.
But the ultimate price would not be jail time, but just to see better-informed consumers decide to take their dollars and accounts elsewhere.
Let’s hope that in 10 or 20 years we look back and see this big bank ripoff as the beginning of the end of Wells Fargo Bank.
Shopping for a home loan?
There is a Wells Fargo in Jefferson City, but I would not advise calling them. There are financial institutions right here in Ashland who would be happy to talk to you – and they will never open an account for you without asking first.