Verschoor explains the findings of the Wells Fargo investigation shows employees also opened online banking services and ordered debit cards without customer consent. demonstrates, at best, a reckless lack of institutional control and, at worst, a culture which actively promotes wanton greed." California Treasurer John Chiang stated: "Wells Fargo's fleecing of its customers . In an article from the American Bankruptcy Institute Journal, Wells Fargo employees reportedly "opened as many as 1.5 million checking and savings accounts, and more than 500,000 credit cards, without customers' authorization." The employees received bonuses for opening new credit cards and checking accounts and enrolling customers in products such as online banking. Under pressure from their supervisors, employees would often open accounts without customer consent. Sloan would later replace John Stumpf as CEO. In the Los Angeles Times article, CFO Timothy Sloan was quoted stating he was unaware of any ".overbearing sales culture". In 2013, a Los Angeles Times investigation revealed intense pressure on bank managers and individual bankers to produce sales against extremely aggressive and even mathematically impossible quotas. Wells Fargo's sales culture and cross-selling strategy, and their impact on customers, were documented by the Wall Street Journal as early as 2011. Under Kovacevich, Norwest encouraged branch employees to sell at least eight products, in an initiative known as "Going for Gr-Eight".
In a 1998 interview, Kovacevich likened mortgages, checking and savings accounts, and credit cards offered by the company to more typical consumer products, and revealed that he considered branch employees to be "salespeople", and consumers to be "customers" rather than "clients". Richard Kovacevich, the former CEO of Norwest Corporation and, later, Wells Fargo, allegedly invented the strategy while at Norwest. Success by retail banks was measured in part by the average number of products held by a customer, and Wells Fargo was long considered the most successful cross-seller. For instance, a customer with a checking account might be encouraged to take out a mortgage, or set up credit card or online banking account. 5.2 Financial and business implicationsīackground Cross-selling Ĭross-selling, the practice underpinning the fraud, is the concept of attempting to sell multiple products to consumers.5 Legacy at Wells Fargo and long-term impact.3 Later government investigations and fines.2.4 On non-management Wells Fargo employees.2 Initial impact of the fraud, legal action, and press coverage.1.5 Initial response from Wells Fargo and management.Senator Elizabeth Warren, a number of settlements between Wells Fargo and various parties, and pledges from new management to reform the bank. The controversy resulted in the resignation of CEO John Stumpf, an investigation into the bank led by U.S. The bank's stable reputation was tarnished by the widespread fraud, the subsequent coverage, and the revelation of other fraudulent practices employed by the company. The bank took relatively few risks in the years leading up to the financial crisis of 2007–2008, which led to an image of stability on Wall Street and in the financial world.
This blame was later shifted to a top-down pressure from higher-level management to open as many accounts as possible through cross-selling.
Initial reports blamed individual Wells Fargo branch workers and managers for the problem, as well as sales incentives associated with selling multiple "solutions" or financial products. Wells Fargo clients began to notice the fraud after being charged unanticipated fees and receiving unexpected credit or debit cards or lines of credit. The creation of these fake accounts continues to have legal and financial ramifications for Wells Fargo and former bank executives as of early 2021. The company faces additional civil and criminal suits reaching an estimated $2.7 billion by the end of 2018. News of the fraud became widely known in late 2016 after various regulatory bodies, including the Consumer Financial Protection Bureau (CFPB), fined the company a combined US$185 million as a result of the illegal activity. The Wells Fargo account fraud scandal is a controversy brought about by the creation of millions of fraudulent savings and checking accounts on behalf of Wells Fargo clients without their consent.