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Wells Fargo Fined For Misleading Customers and Falsifying Documents

This article was written by in Real Estate and Home. 9 comments.


It always pays to shop around. If more mortgage customers didn’t choose to borrow from the trusted institution that held their savings and checking accounts without question, it seems that these customers could have found lower interest rates, particularly if these borrowers were customers of Wells Fargo. The Federal Reserve is alleging that between 2004 and 2008, Wells Fargo sold mortgages with higher interest rates to customers who should have qualified for lower interest rates and changed information on documents, such as income, to make it appear as if these customers didn’t qualify for better rates.

As a result, the Fed is slapping Wells Fargo on the wrist with an $85 million fine and a directive to compensate up to 10,000 affected customers who may receive as much as $20,000 in restitution.

The Fed says that the Wells Fargo Financial subsidiary encouraged its employees’ unethical practices by having sales quotas. The bank doesn’t need to admit they did anything wrong, but in their marketing message, Wells Fargo says the actions of a select number of employees shouldn’t reflect poorly on the company as a whole. The $85 million amounts to just over 2% of Wells Fargo’s second quarter profit, and the bank had already set money aside to compensate the affected customers. A fine of 2% of a company’s quarterly profit is hardly a penalty.

While a financial institution should not lie about your finances to trap you into an expensive loan, potential borrowers should take a few steps to prevent themselves from a bank that might take advantage of them.

  • Know your credit. Get a free credit score, free credit reports from AnnualCreditReport.org, and analyze your credit report. There should be no surprises when you apply for a mortgage, and with this knowledge, you should be able to tell if a mortgage broker is lying to you about your score or your credit history.
  • Shop around. Yes, it’s difficult to find the right mortgage. It’s easy to be tempted into walking into the bank where you do business and ask to speak to their mortgage consultant. You should do this, but your shopping shouldn’t stop here. Find other local banks, community banks, and credit unions. Look online.
  • Know the market. Be aware of the best mortgage interest rates. While companies often advertise their absolute best rates that only those with perfect credit will receive, this should give you an idea of the rates you should expect and prevent you from accepting a deal where the rate is unreasonable.

The conversation usually turns to determining who is to blame: the uninformed customers who end up paying more than they need to, the bank’s representatives who are viewed as trusted experts rather than salespeople trying to meet quotas, or the bank’s management that sets the policy and the environment. Everyone shares some blame, but as a customer, one can’t control anything other than your own actions and reactions to other people. Put yourself in the best situation as possible by understanding your own financial situation and recognizing that when you deal with any company, they are trying to sell you something and not always looking out for your best interest.

Wells Fargo is the bank where, through a series of acquisitions and mergers, I’ve been keeping most of my non-online deposits and active checking accounts for my entire adult life, but if I thought I had been misled I would have no problem moving my accounts elsewhere. I do not have a mortgage or any type of loan from Wells Fargo.

CNN Money

Published or updated July 21, 2011. 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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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 9 comments… read them below or add one }

avatar wylerassociate ♦162 (Cent)

This doesn’t surprise me at all as I don’t think wells fargo is the only bank that misleads customers. I’m looking to buy a house in the next 12-18 months and wells fargo is off the list of banks that I want to apply for a mortgage.

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avatar shellye ♦107 (Cent)

A homebuyer’s best bet, I believe, is to find a good mortgage broker for a home loan. They will do the shopping for you and save much of the hassle and rip-off potential of these large banks. You can’t prevent them from selling off your loan once it’s been closed, but at least you might be able to avoid getting ripped off.

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avatar Ceecee ♦53 (Newbie)

This does not build trust in banks in general, as Wells Fargo was one of the more respected ones. It pays to be a very informed consumer……..caveat emptor, even with buying bank services!

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avatar Jon -- Free Money Wisdom

Great to know. There is one bank I will be crossing off my list if ever I am in need of a mortgage. Where is honesty these days?

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avatar Bobka ♦13 (Newbie)

Since credit unions aren’t under pressure from stockholders, you might want to check out a local credit union. Many of them have in-house mortgage brokers that will help you through the mortgage finding process.

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avatar lynn ♦155 (Cent)

Small independent banks make it more difficult to get a mortgage, but (as far as banks go) can be trusted more than global institutions. It appears that global equates to deception.

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avatar skylog ♦368 (Nickel)

it is hard to believe that stuff like this actually happened and probably still happens today. yes, it is still hard for me to believe even after story after story like this has come to light over the past few years. it is one thing for a person to do something to mislead another person. it is still horrible on a societal level, but for firms and companies to be doing acts like this just blows my mind. i am not naive, and i understand businesses have been doing this ever since businesses have been around, but how did we get here? changing information? really?

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avatar lynn ♦155 (Cent)

SKY: Greed is an awful thing. It reins from the government on down the line. Trickle Down Effect. God help us all!

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avatar qixx ♦1,880 (Half-Dollar)

Are all the new Wells Fargo fees directly related to this fine; or is it just bad timing on the part of Wells Fargo?

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