5,300 Wells Fargo employees were fired for opening 1.5 million fraudulent bank and credit card accounts for customers who neither wanted nor asked for them. Wells Fargo is just one example of problems within the banking industry. What’s next for Wells Fargo and banking as a whole?
$185 Million Fine to Wells Fargo – Federal Regulators
Since 2011, Wells Fargo employees have secretly created millions of unauthorized bank and credit card accounts without any customer knowledge. Those employees were fired, but what does this say about Wells Fargo? And about banking in general?
We live in a society where banking is a business. Banks have shareholders. Banks have profit margins. And banks have customers. So what does it say when a bank has 5,300 employees defrauding those customers? This seems like a much bigger problem than a few bad apples. This is a case of not just company culture, but industry culture.
Wells Fargo is the most valuable bank in the USA with a net worth of $250 billion. As such, the bank is expected to grow profits (and customer accounts) year over year. One piece of that is incentivizing employees to open new bank and credit accounts.
Regulators said the bank’s employees had been motivated to open the unauthorized accounts by compensation policies which rewarded them for opening new accounts. Many current and former Wells Fargo employees told regulators they had felt extreme pressure to open as many accounts as possible, leading to Federal bank regulators dropping the fine.
$185 million is a drop in the bucket for Wells Fargo. The much bigger issue here is how will everyday banking customers like you and me react to the news? This story reflects a serious lack of oversight and a (at best) not great company culture.
Wells Fargo has 40 million retail customers, and 5% of them were just defrauded. That’s one out of every 20 customers. I, for one, would not take that risk with my bank. Nor will a majority of the American public.
Expect to see some new banking regulations enacted in the long term. And in the near future, expect to see Wells Fargo lose customers. With the loss of customers comes the loss of profits. And with the loss of profits, share prices go down.
Watch this video from CNN to see what Democratic Senator Elizabeth Warren has to say about it.
Wells Fargo (WFC) is too big to fail, but this is a warning to all banks. For now shares are about to take a hit and drop.
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