Summary: Wells Fargo fired 5,300 employees for creating fake accounts to collect real fees from customers.
Bank customers hate paying fees, but some Wells Fargo employees took their greed to a new level by creating ghost bank and credit card accounts without permission in order to collect extra money.
The scheme was discovered by the Consumer Financial Protection Bureau (CFPB). Starting in 2011, 5,300 Wells Fargo employees created over 1.5 million phony accounts without customers’ knowledge. The fake accounts allowed the employees to boost sales figures and earn bonuses, and the fake accounts collected real fees from unsuspecting consumers.
Wells Fargo told CNN Money that it had fired its shady employees over the last few years.
The CFPB said that the scheme was elaborate enough where the dishonest employees created fake PIN numbers and email addresses to enroll real people in online banking services. The employees would then move money from the customers’ existing accounts into the fake ones without their knowledge. This left customers unwittingly with balances that opened them up to overdraft fees or charges for insufficient funds.
The CFPB added that Wells Fargo’s greedy employees also applied for over 560,000 credit cards without consumer’s knowledge or consent. Some of those accounts incurred costs such as annual fees, interest charges, and overdraft protection.
Wells Fargo will pay full restitution to its victims, and the amount totals to about $5 million. Wells Fargo will also pay a $185 million fine.
Georgetown Professor David Vladeck said that the penalty did not seem substantial enough for the company which CNN Money said has a value of $250 billion.
“One wonders whether (the CFPB) penalty of $100 million is enough,” said Vladeck. “It sounds like a big number, but for a bank the size of Wells Fargo, it isn’t really.”
Wells Fargo has publicly acknowledged the scandal.
“We regret and take responsibility for any instances where customers may have received a product that they did not request,” Wells Fargo said.
Wells Fargo employed 265,000 employees as of 2015. In a memo to employees on Thursday, the company said that whenever mistakes were made, it takes responsibility and action. As part of its settlement, it will make changes on its sales practices and internal operations.
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Source: CNN Money
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