Posted by Brandon Bartkiewicz.
It has been almost two years since the Wells Fargo scandal broke into the headlines. It is not out of the ordinary to see a bank involved in shady activities; just look at the recession. However, in 2016, Wells Fargo committed a truly unforgivable crime, identity theft and fraud on a massive scale. To refresh, Wells Fargo had “… secretly opened millions of deposit and credit card accounts that may not have been authorized by customers, and that ultimately harmed those who had entrusted their financial affairs with the bank”. The goal of this was to create an illusion of more “sales” (accounts being opened). They did this by transferring money between accounts without permission of the accountholder. These activities were highly encouraged by an incentive system in place that would reward employees for opening accounts. Everyone was in on this; bank managers pressured their employees, and the executive board of Wells Fargo knew this was going on and did not stop it. By August 2017, the investigation found that as many as 3.5 million unauthorized accounts existed in Wells Fargo’s records.
The news of this wide scale fraud fueled a settlement with the U.S. Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and Los Angeles legal officials, totaling $185 million in penalties. Along with this, Wells Fargo would give “… $80 million in refunds — $64 million in cash and $16 million in account adjustments — to more than 570,000 auto loan customers who were charged for auto insurance without their knowledge.” As it should be, the bank is now in financial trouble as it tries to cover all of the direct and indirect costs relating to the scandal. However, the Janet Yellen and the Federal Reserve is not done disciplining the bank. Due to their “widespread customer abuses and compliance breakdowns,” the bank is now restricted from growing any more than its total asset size in 2017. Along with this, the bank will remove some of the senior ranking executives in the company. This is done to ensure that Wells Fargo will have sound business practices before it can grow again.
Personally, I believe that punishments handed down by the Federal Reserve were suitable for Wells Fargo. It provides a clear message to all banks that business malpractice is unacceptable and will be punished by harsh penalties. No bank should be able to get away with using client money and creating unauthorized accounts for personal gain. I wish the American legal system were stricter with companies so it would deviate them from doing illegal acts like this in the first place. What I did not like about this case was the fact that there are still plenty of people who have been long time officials of the company and are still employed by Wells Fargo. If you keep many of the same old pieces in place at a company, something like this is bound to happen again.
Brandon is a finance major in the Stillman School of Business, Seton Hall University, Class of 2020.
Source:
Link: https://www.usatoday.com/story/money/2018/02/02/fed-limits-wells-fargos-growth-citing-consumer-abuses/302973002/
Posted by Daniel Szatkowski.
According to Chris Bruce in a Bloomberg article dated October 17, 2017, Wells Fargo was found charging costumers fees to lock interest rates on mortgages and other loans made with the bank. The lock rate fees earned by Wells Fargo are up to $98 million in the period of approximately four and half years ending February 2017. Wells Fargo incorrectly claims that their clients are behind and/or missing payments, which would lead to increased interest rates. Instead of increasing the rate, Wells Fargo tells them to pay rate-lock fees to keep the rate where it is.
The manner in which Wells Fargo is charging lock-rate fees is unethical. First of all, many of the Wells Fargo clients were not actually behind on their loan payments. According to Brian Brach and other mortgage applicants, “Wells Fargo employees wrongfully blamed customers for loan processing delays and made them pay fees to maintain a lock on interest rates that might otherwise expire.” The delays were caused by Wells Fargo, which triggered the rate-lock fees; therefore, no fees should have been issued to the clients.
Wells Fargo wanted to unethically increase their profit by charging these rate-lock fees even though they did not apply to the situation. The company’s reputation will drop due to the new unwanted press and the clients are putting Wells Fargo on trial. The first of the reimbursement will be sent out during the final quarter of this year.
Daniel is an accounting major at the Stillman School of Business, Seton Hall University, Class of 2020.
Posted by Varundeep Singh.
Over the past few years Wells Fargo employees have been secretly scheming customers and breaking rules and crossing ethical boundaries that should not be crossed. Wells Fargo employees were making “dummy accounts,” or best described as fake accounts, to meet their sales quotas and receive bonuses. These accounts were not authorized, but they still somehow made the bank a lot of money because Wells Fargo customers were being charged random fees that were not rightfully associated to them. The employees went as far as making fake emails and fake pin numbers to make these accounts look real and make them work. In the article it states, “The scope of the scandal is shocking. An analysis conducted by a consulting firm hired by Wells Fargo concluded that bank employees opened over 1.5 million deposit accounts that may not have been authorized.” This shows how huge the scandal really was and how far the employees at Wells Fargo went just to meet their quota.
In many cases, the employees would take money out of customers accounts and put it into the fake accounts. This would lead to over draft fees because customers would not have enough money in their account. Wells Fargo was charging these fees and making money off of their customers who did nothing wrong. This dilemma with Wells Fargo shows how corrupt big banks can be and how much stricter they need to be on their employees. 1.5 million fake accounts is a lot of illegal activity and the fact that the company took so long to catch on shows that their management was really weak and careless. This is morally wrong and Wells Fargo should have been fined more than they did get fined.
Wells Fargo’s agreed to pay $185 million in fines and $5 million in refunds to their customers. Many people feel that they were let off too easy because the scope of this scandal was much more humongous and impacted people more. With all these dummy accounts, it is evident that Wells Fargo definitely schemed more than $5 million from customers.
I believe that a big bank such as Wells Fargo should know where they stand and by letting a scandal like this happen; they have shown that they cannot be trusted. In my opinion Wells Fargo should have faced much bigger consequences and by paying such a small amount of money and firing 5300 employees within two years they were still let off very easily. All in all, the Wells Fargo scandal will forever be an example of how big banks cannot be trusted and how there should be stricter regulations towards these banks. Something like this should be avoidable in the future if the right actions are taken now.
Varundeep is a finance and management major at the Stillman School of Business, Seton Hall University, Class of 2019.
Posted by Frankie Panicucci.
Wells Fargo is a corporate bank with very high and unrealistic sales targets. To meet these unrealistic sales targets Wells Fargo employees were secretly opening millions of unauthorized bank and credit card accounts for customers without their knowledge. These unauthorized accounts that were created racked up fees and allowed Wells Fargo to make more money. The accounts that were created started all the way back in 2011. The company then learned of this behavior and fired about 5,300 employees over the years. In order to pull off the scheme, the employees transferred funds from a customer’s original account into a new one without their knowledge, and it is estimated that around 1.5 million accounts were created. Customers were then being charged for over drafting or not having enough of a minimum balance in the original account. Employees also submitted over five hundred thousand applications for credit cards without the customer’s knowledge. Some of these accounts were charged over $400,000 in fees.
Wells Fargo was eventually caught committing these crimes after being investigated by the Consumer Financial Protection Bureau (CPFB). Wells Fargo is being fined with the largest fine since the CPFB’s inception; a fine of $185 million and also must refund customers $5 million. Of the $185 million, $100 million will go to the CFPB’s penalty fund, $35 million to the Office of the Comptroller of the Currency, and $50 million will go to the City and County of Los Angeles. As part of the settlement Wells Fargo also needs to make changes to its “sales practices and internal oversight.” The CPFB declined to mention how the investigation began.
The initial suspicions of accounts being created for customers began when some customers complained to Wells Fargo about unauthorized accounts that were created on their behalf. L.A. City’s Attorney, Mike Feuer, says, “Consumers must be able to trust their banks.” Feuer sued Wells Fargo in May of 2015 in relation to the unauthorized accounts. Once the suit was filed, he began to receive calls and emails from customers regarding the issue. Wells Fargo hired a consulting firm to look into the allegations after the suit was filed. After the investigation Wells Fargo released an internal statement which says, “At Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action.”
Frankie is an economics and finance major at the Stillman School of Business, Seton Hall University, Class of 2019.
Posted by Gurpreet Kaur.
CNN Money released an article on Well Fargo’s employees secretly withdrawing money from customers’ bank account and transferring to new accounts since 2011. The article was published on September 8th of this year and Wells Fargo bank was forced to fire 5,300 employees in Los Angles for setting up accounts for customers. This fraud was taking place without any of the customers’ knowledge. After this fraud, many customers were fumed because their bank accounts were unsafe. The employees’ fraud was unethical and illegal because they were creating credit card accounts without letting their customers know.
Brian Kennedy, a Maryland retiree, was one of the victims and he told CNN Money “he detected an unauthorized Wells Fargo account had been created in his name about a year ago. He asked Wells Fargo about it and the bank closed it.” Wells Fargo’s customers had trust in the bank. The victims of this fraud could have filed for refunds, but it wasn’t necessary because Wells Fargo agreed to refund 5 million dollars to them. The settlement in Los Angles required Wells Fargo to warn their California customers to shut down their unrecognized accounts. The fraud caused the bank to unemployed 5,300 workers over these five years.
Richard Cordray is the director of the Consumer Financial Protection Bureau and he said, “Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses.” Those employees transferred funds from customers’ accounts without their knowledge to new accounts they created. Customers were upset because they were facing overdraft fees and insufficient fees. Wells Fargo stated, “We regret and take responsibility for any instances where customers may have received a product that they did not request.” Wells Fargo’s market valuation was the highest in America, but the fraud led to lawsuits against Wells Fargo. In May 2015, “Feuer’s office sued Wells Fargo for authorizing accounts” and “after filing the suit, his office received more than 1,000 calls and emails from customers as well as current and former Wells Fargo employees about the allegations.”
Gurpreet is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2019.
Posted by Anna Fintor.
Wells Fargo is currently involved in a legal scandal in which it is said to have opened bank accounts and credit cards without the costumer’s consent. According to Reuters, “The U.S. Consumer Financial Protection Bureau and other regulators ordered United States’ third-largest bank by assets to pay $190 million in fines and restitution to settle civil charges.” The scandal has been going on for several years and there were as many as 2 million accounts opened illegally.
Wells Fargo has been known for its “high-pressure” sales culture, which one of my personal friends who has worked in one of the branches can account for. The Bloomberg article I have read describes how anonymous users have been posting cartoonish videos on YouTube presenting the negative work atmosphere at Wells Fargo. The videos show how management pressured and threatened workers that if the unreasonable goals were not met the workers would be let go. It is suspected that the videos were created by employees as far back as in 2010.
While reading the articles, I remembered one of the discussions from class of how in large corporations top executives can pressure the bottom level workers to commit the illegal activity. One of the YouTube videos shows that bankers received $5 McDonald’s gift cards for opening a new account, while the executives received generous bonuses. In my opinion that’s very unethical and just wrong.
In the recent weeks the CEO, Jhon Stumpf has resigned and Wells Fargo continues to be under investigation. I feel like this situation is going to hurt Wells Fargo not only financially but also create bad reputation. Due to the popularity of social media, the videos will spread to a vast number of the population, including to those who may not be keeping up with the news.
Anna is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2018.
Sources:
https://www.bloomberg.com/gadfly/articles/2016-10-21/psst-regulators-watch-videos-for-bank-scandal-after-wells-fargo
https://www.bloomberg.com/gadfly/articles/2016-10-21/psst-regulators-watch-videos-for-bank-scandal-after-wells-fargon fines and restitution to settle civil charges
http://www.reuters.com/article/us-wells-fargo-accounts-california-idUSKCN12J2O
Posted by Alexa Constantine.
The New York Times on October 11th of this year released the article describing Wells Fargo’s fraud scandal that was brought to the public eye last month. The ethics scandal came to light last month, but the fraud has been going on for years, maybe even a decade with the first report in 2005. Julie Tishkoff in 2005 wrote to the Wells Fargo human resources about how she saw employees setting up sham accounts, forging customer signatures, and the sending out of unsolicited credit cards. Her complaining went on for four years. Tishkoff was not the only employee who was complaining to the internal ethics hotline, the human resources department, and to the managers and supervisors.
In 2011, John G. Stumpf, the board chairman, received at least two letters from Wells Fargo employees describing the illegal activities they have witnessed. Mr. Stumpf became president the year Julie Tishkoff wrote to human resources. In September of this year, Mr. Stumpf testified in front of Congress, twice, stating that, “he and other senior managers only realized in 2013 that they had a big problem on their hands — two years after the bank had started firing people over this issue.” In 2013, Wells Fargo launched the internal investigation within their company for the fraud they realized that was happening. But by then, the prosecutors and regulators caught on and in May of 2015 a lawsuit was filed. The Los Angeles city attorney filed the lawsuit for the creation of unauthorized accounts against Wells Fargo. The case was settled this September of 2016.
After the lawsuit settled, Mary Eshet, spokeswoman for Wells Fargo said, “We have made fundamental changes to help ensure team members are not being pressured to sell products, customers are receiving the right solutions for their financial needs, our customer-focused culture is upheld at all times and that customer satisfaction is high.” And since September 8th, Wells Fargo will pay $185 million in fines for the opening about two million customer accounts and credit cards without authorization. Wells Fargo is taking responsibility for the scandal and is making changes to the company.
The scandal still continues after the settlement. Former employees whose are suing Wells Fargo state that many of the managers at the branch level and the people who heard their ethics complaints are still employed. The employees who complained and brought to light the fraud within the company lost their jobs shortly after they complained. Between 2011 and this year, Wells Fargo terminated the employment of 5,300 workers, “around 10 percent of those worked at the branch manager level or above, according to the bank, but only one — an area president — had a high-level management role.” The whistleblowers lost their jobs while the people who should have acknowledged the fraud kept their jobs. Mr. Stumpf acknowledged the outrage of former employees about how the bank should have heeded what they said were warning and taken action earlier by saying, “We should have done more sooner.” Mr. Stumpf’s answer does not satisfy former employees.
Alexa is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2019.
Posted by Ivanna Klics.
There has been quite a ruckus at Wells Fargo as they made headlines for causing fraudulent transactions that have not been authorized by the customers themselves. Wells Fargo is being accused for creating banking and credit card accounts without the permission of its customers. Who are the customers more to blame then the CEO, John Stumpf; however, in his defense, he is not capable of overlooking every branch in the bank. Stumpf’s leaders have not only stepped out of their comfort in the company but the reputation of the company, as well as opening up the door to a criminal investigation case.
The investigation has put the company to shame. Stumpf appears to be clueless of what has been going on literally right under his nose. Because it is almost impossible for these events to occur overnight, management should have known about it for a long time. Whether Stumpf admits it or not, Charles Gasparino stated “he and the bank will still face numerous civil and criminal inquiries for years to come.”
Although the company does not mean all harm, Wells Fargo is still one of the most profitable banks worldwide; however the company’s perception has had a dramatic change. Currently the company is facing a congressional investigation, and who knows if they will be able to build back their reputation.
Ivanna is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2019.
Posted by Dylan Beland.
One of the most talked about issues in business law news is the Wells Fargo scandal. The story behind this scandal is that the Department of Justice and many attorneys are investigating the possibility that Wells Fargo has millions of fake accounts opened at their banks. The result of the investigation was Wells Fargo had to pay a 185 million dollar fine. Wells Fargo had to let go over 5,300 workers for fraudulent sales tactics.
From this, the concern and worry in the banking industry instigated a lot of questions about the fake accounts being opened. Employees were pushed to reach near-impossible sales targets, which in turn led to the creation of fake accounts. Mike Mayo, a banking analysist at CSLA, said the investigation “reflects pent-up frustration by the public over the lack of accountability at big banks post financial crisis.”
The people that could see some blame for this are the investors of the banks. One of Wells Fargo’s biggest investors has not spoken, since the situation has arisen. Warren Buffett is Wells Fargo’s biggest investor and he owns Warren Buffett’s Berkshire Hathaway.
On September 20, Wells Fargo is meeting with the Senate and is having John Stumpf, CEO, represent and testify at the hearing. He apologized for the fake accounts but also said he does not plan on resigning from being CEO of Wells Fargo.
Dylan is an accounting major at the Feliciano School of Business, Montclair State University.
Posted by Carter McIntosh.
On November 5th, 2015, the Department of Justice announced that Wells Fargo failed to notify bankrupt homeowners of mortgage payment increases. Wells Fargo was required to pay out $81.6 million to “homeowners after reaching a settlement with the Department of Justice’s U.S. Trustee Program over the banks ‘repeated failures’ to provide Bankrupt homeowners with legally required notices of mortgage payment increases.” The Federal Bankruptcy Rule 3002.1 requires mortgage creditors (Wells Fargo) to file and serve a notice 21 days before adjusting a Chapter 13 debtor’s monthly mortgage payment.
The failure that sparked Wells Fargo’s fine was the fact that in Chapter 13 bankruptcy cases they did not file and serve the mortgage lenders with a notice 21 days before Wells Fargo adjusted the monthly mortgage payment. In fact, when the DOJ pursued this case, “Wells Fargo acknowledged that it failed to timely file more than 100,000 payment change notices and failed to timely perform more than 18,000 escrow analyses in cases involving nearly 68,000 accounts of homeowners in bankruptcy between Dec. 1, 2011 and March 31, 2015.”
The $81.6 million settlement that Wells Fargo agreed to pay to the homeowners within the time period listed above is made to several different groups of borrowers. The first group, which consists of $53.6 million of the $81.6 million, will go to “more than 42,000 homeowners whose payments increased as to which Wells Fargo failed to timely file a PNC with the court, each homeowner will receive on average $1,254.”
The next group, which consists of $10 million, will go to “crediting homeowners’ accounts at the end of their Bankruptcy cases.” The third group, which consist of $1.5 million, will go to “refunding in cash about 3,000 homeowners where notices of decreases in monthly payments were not timely provided and the homeowners paid more than the actual amount.” The fourth group consists of $1 million and will go to “refunding in cash to about 2,400 homeowners who satisfied escrow shortages by making a lump sum payment.” The fifth group consists of $4.5 million and will go to “crediting mortgage escrow accounts of about 6,000 homeowners who did not receive timely escrow statements.”
The sixth group, which consists of $4 million, will go to “paying about 12,000 homeowners by crediting mortgage accounts where Wells Fargo failed to timely perform an escrow analysis.” The seventh group, which consists of $4 million, will go to “refunding in cash about 6,000 homeowners who did not receive timely escrow statements.” The eighth and final group, which consists of $3 million, will go to “remediation to about 8,000 homeowners which has already been completed.”
According to Director Cliff White of the U.S. Trustee Program, he is “pleased that Wells Fargo has acted responsibly by accepting accountability for its deficient bankruptcy practices, agreed to compensate affected homeowners for those deficiencies and committed to making necessary improvements in its Bankruptcy operations.”
Carter is a finance major at the Stillman School of Business, Seton Hall University, Class of 2018.