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Wells Fargo Fined for Creating 2 Million Fake Accounts to Collect Fraudulent Fees

This article was written by in Banking. 2 comments.

Everyone hates bank maintenance fees. (If you don’t, email me – I have a few you’re welcome to take.) So, what would you think if you discovered that your bank had been charging you fees for an account you never opened? In fact, THEY secretly submitted an application and opened that account on your behalf. I’d imagine, you’d be furious.

So, you might be surprised to learn that Wells Fargo has fired over 5,300 employees over the past few years for this exact practice. A practice which, we’re learning, has affected a surprising number of customers. In fact, a consulting firm was hired by Wells Fargo to conduct an external investigation, and found that bank employees may have opened as many as 1.5 million deposit accounts without their customers’ permission or knowledge.

They also submitted 565,443 applications for credit card accounts without consent of the customers. These accounts racked up annual fees, interest charges, and even fees for overdraft protection. The resulting damage equates to almost half a million dollars in erroneous fees – over $400,000 from 14,000 credit card accounts alone, in fact.

Apparently, this practice has been going on since 2011, with employees fraudulently opening both these bank and credit card accounts. But why? Richard Cordray, director of the Consumer Financial Protection Bureau, says that,”Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses.” Ah, it’s starting to make sense now.

‘How could they possibly get away with something like this, though?’ you may be asking. Well, for fake bank accounts, employees were moving customers’ existing funds from authorized accounts into the new, fraudulent ones. Because of this, many customers were hit with insufficient funds or overdraft fees, as they didn’t have as much money in their bank accounts as they had deposited. Many employees were even going as far as creating fake email addresses and PIN numbers, in order to enroll the victimized customers in online banking services without their knowledge.

As expected, people are fuming. Many are asking how such a large bank, with an extensive network of internal controls, could even allow this to happen on such a large scale. Between the discovered deposit accounts and credit card applications, that equates to over 2 million victimized customers. Keep in mind that 5,300 employees have been fired over the past few years for this practice. It has obviously been a well-documented problem within the company for a while. So, why wasn’t something done years ago to prevent it from continuing?

Regardless of how it got so out of hand, Wells Fargo is in quite a bit of hot water now. They have, of course, agreed to pay “full restitution to all victims,” as well as been slammed with $185 million in fines — which is the largest penalty imposed on a company since the CFPB’s founding in 2011. On top of that, Wells Fargo will also refund $5 million to its impacted customers.

While $185 million sounds like a lot of money, some are questioning whether it’s even enough. Wells Fargo, after all, is worth over $250 billion, with Warren Buffet as the leading stakeholder in the company. These fines equate to a mere 0.074% of their worth. That’s a drop in the financial bucket, after such a grievous breach of trust and ethics.

This betrayal will surely have impacts on the company for years to come, though. When picking the financial institution that will hold your money (and often, your credit) in their hands, it’s imperative that they been deemed trustworthy. Most people wouldn’t choose a bank with a history of fraudulent activity or unauthorized use of personal information and funds. Maybe they will be able to earn back their customers’ faith in the coming years. Personally, I’ll be keeping my money and information at my existing credit union, whom I trust.

Are you a Wells Fargo customer? What are your thoughts on this being brought to light? If you’re not a WF customer, would you consider opening an account with them in the future?

Published or updated September 9, 2016. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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{ 2 comments… read them below or add one }

avatar 1 Peter Salvo

When you know how this company works none of this should be surprising. Each bank manager is badgered two or three times a day for how many new accounts they have opened. If they fall behind they are pressured even more. many leave because of this. Wells has something like 30% staff turnover every year, easy to see why. Wells is obsessed with “number of relationships” it has with each customer, read; accounts opened. And this they believe makes them better than the others of the “Big Four”. It is why Warren Buffet likes them so much – they are ruthless and it now turns out (surprise, surprise) illegal cross-sellers. The con they perpetrate is they are Main Street USA not Wall Street. They might not be headquartered on Wall Street but they are every bit as bad if not worse than Wall Street banks, it is just they do it from San Francisco, Charlotte and Minneapolis instead. “Together We’ll Go Far”, what they mean is off your back they line their pockets.

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avatar 2 Xyz

This is pretty crazy, considering that it’s coming from one of the biggest. It seems like the top tiers of management was behind it but they would never admit to that of course.

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