It seems like every time you turn around, another negative story about banking giant Wells Fargo comes to light. As of late 2013, Wells Fargo was ranked as the fourth-largest bank, behind JP Morgan Chase, Bank of America and Citigroup, with nearly 1.8 trillion in assets. That same report claimed that Wells Fargo saw the biggest increase in assets among the top four banks from 2012 to 2013. This growth was attributed to overseas loan purchases, as well as picking up cheap European loan portfolios from struggling institutions. Now it appears that the continued growth of megabank Wells Fargo may have some shadier aspects as well.
Wells Fargo Will Pay $185 Million to Settle Latest Scandal
With one scandal after another dogging Wells Fargo, the San Francisco-based bank recently agreed to pay $185 million to settle a federal complaint accusing Wells Fargo of creating more than two million fraudulent customer accounts. Heads rolled when this latest scandal came to light, with more than 5,000 Wells Fargo employees fired over the past two years. Additionally, the bank claims it will put new policies into place which will stop this type of incident from occurring in the future.
“Incentive-Driven” Culture Leads to Fraudulent Employee Practices
It is believed the “incentive-driven” culture of Wells Fargo Bank was the motivating factor in the fraudulent customer account scandal. Reputation Management Consultant Eric Schiffer recently said in an interview that when profits overtake questionable activities, serious problems can occur and that “When you turn a blind eye, then you are endorsing the behavior.”
Wells Fargo Facing One Legal Battle After Another
Wells Fargo has faced a long string of legal battles over the past several years, including those which claimed the bank engaged in predatory lending practices, imposed illegal fees on their customers, and discriminated in their hiring practices. Just a month ago, Wells Fargo agreed to pay $4 million in fines for allegedly charging illegal fees to students who borrowed money to attend college from the bank. It appears Wells Fargo applied loan payments in a way which caused student loan borrowers to face multiple late fees. According to a Wells Fargo those specific practices were modified “years ago.”
False Home Loan Claims Results in the Largest FHA Settlement in History
The U.S. Department of Justice filed suit against Wells Fargo, resulting in a $1.2 billion settlement—the largest in FHA history—for falsely claiming its home loans qualified to be insured by the Federal Housing Administration. In that same lawsuit, Wells Fargo was shown to have avoiding fixing literally thousands of improperly written loans. When the borrowers defaulted, the FHA was left holding the bag. By extension, American taxpayers ended up paying for Wells Fargo’s bad loans.
“Ghetto Loans” Cause Hundreds of Families to Lose Homes
Another federal lawsuit facing Wells Fargo revolves around claims by the City of Baltimore that the bank specifically targeted African-Americans with high-interest, predatory loans. Specifically, Wells Fargo targeted black churches, believing the leaders of the churches could and would influence those attending the church to take out subprime lines. Called “ghetto loans” by employees of Wells Fargo, these loans caused hundreds of families to lose their homes to foreclosure, and cost the city of Baltimore millions.
How Much of the Latest $185 Million in Fines Will Consumers Receive?
When this most recent scandal came to light, Wells Fargo officials admitted their mistakes, claiming they would engage in better employee training to avoid future issues like this one. Wells Fargo employees issued credit cards with no customer consent and created fake e-mails in order to sign customers up for online banking services. Most of the customers learned about those unwanted services only after they began accumulating unexpected fees, or received credit or debit cards in the mail which were not requested.
For the most part, the sham accounts were closed shortly after being opened. Of the $185 million Wells Fargo will pay, $100 million of that is a penalty from CFPB, and only about $2.6 million will be refunded to customers for inappropriately charged fees. Some $35 million will go to the Office of the Comptroller of the Currency, while the City and County of Los Angeles will receive from $48-$50 million.
Consumer Protection Lawyers
If you or someone you love has been a victim of unfair or deceptive bank practices, contact the national consumer protection lawyers at Golomb Legaltoday at (215) 278-4449, or fill out our confidential Contact Form. We have successfully fought credit card companies, banks, and financial institutions and protected consumer rights for decades. Call us today to review your case.
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