In early September former Wells Fargo CEO, John Stumpf, was outed by Federal Regulators as the mastermind of a scheme in which the company covertly registered members for additional “ghost accounts” as an excuse to charge customers extra monthly fees to maintain accounts they weren’t using, all just to hit their monthly quotas and fatten their yearly bonuses.
From an early age, our parents did their best to instill in us the value of the dollar. When we were young, most of us got our first jobs and felt a boost in responsibility. What board members at Wells Fargo took it upon themselves to do is sick.
Wells Fargo reported to CNNMoney that they fired 5,300 employees over the last few years due to the scandal.
In the scheme, employees would take any random person and move money from their pre-existing account into the newly created one without their knowledge or approval. Then the company would be able to charge them for insufficient funds and overdraft fees, because there wasn’t enough money in their original account to maintain the minimum balance. On top of this, employees would write false applications for credit cards and pursue the victims for annual fees, interest charges and overdraft fees on a card they had no idea they ever signed up for.
The company is being hit with the most sizable fine that the CFPB has ever issued since its founding in 2011: $185 million in fines and another $5 million in refunds to customers. As part of the settlement issued to Wells Fargo by the CFPB, the bank must make drastic changes to both their sales practices and internal oversights.
If I was in the same position as a Wells Fargo customer, I would definitely take some form of legal action. But not as an individual. Against a giant corporation like Wells Fargo, I wouldn’t really stand a chance in court. However, many of the now former Wells Fargo customers have decided that the $185 million penalty issued to the bank isn’t enough of a recompense and have individually taken up legal action against Wells Fargo. Mike Feuer, a Los Angeles City Attorney, was quoted as saying, “Consumers must be able to trust their banks.” A condition of the settlement from L.A. that they have to abide by is to alert all California members to review their statements and shut down any unwanted accounts.
On top of firing 5,300 employees, Stumpf stepped down from his position following his confirmed involvement in the accounting fraud scandal. His confirmed payout originally was $123.6 million, but Wells Fargo recently reported that Stumpf has forfeited his outstanding stock awards/options worth approximately $41 million in response to the scandal. Stumpf also agreed to forego his salary while Wells Fargo conducts an investigation.
What’s interesting is the scheme itself isn’t too well thought out. If someone like Stumpf, a man with a multi-million dollar net worth, was the ringleader, one would think that he would’ve organized more carefully so that it would not be so easily uncovered. There was probably a board meeting that occurred when investigations began .possibly resulting in a group consensus where Stumpf decided to be the scapegoat and bow out with a fat payout. But once he hit court and faced multiple prosecutors, his image was tarnished and his payout was diminished. On top of Stumpf’s departure, the former retail-banking head Carrie Tolstedt also left the company and is forfeiting her stock options: a combined worth of $19 million.
When I was first applying to college a big thing that influenced my decision was how much it would cost me. I remember filling out hundreds of scholarship forms: applying for any and all scholarships. Financial aid helped out somewhat, but most of the cost came out of my pocket. Tuition and dorming weren’t even all of the costs. A dorm room needs sheets, books, food, mini-fridge and other things that just added onto the cost. I paid for it with money I’ve had since birth. And I know I’m not the only person at Stony Brook University who’s been in this situation.
Now imagine that your bank bill, for some reason, went up a couple hundred dollars. The original rate was manageable. This new one is out of your range and you’re stuck paying for it since you have no time because, like a typical college student, you’re swamped with homework and classes. Raised monthly rates and all the unpaid fees on a card that you didn’t know existed or signed up for, brings your credit score down.
But this isn’t this a Wells Fargo problem and not something people who belong to other banks should be worried about? Well, a report from S&P Global recommends that people keep an eye on their accounts for any unusual changes in payments or balance. S&P analyzed consumer complaints and reports that were similar to what happened in Wells Fargo and found that there were similar complaints in different major banks.
These are just claims at this point, but it’s not too bad of an idea to just be wary of statements. For college students in a similar situation as I described, be wary of your bank statements and make an effort to keep track of your finances to ensure that you’re not scammed out of your money. Try to be informed as possible about different terms when it comes to your bank account, and do some research about which bank suits your needs the best.
Scandals like this occur every day, but most of them aren’t caught ever or until it’s too late. Wells Fargo just happened to be too careless when they covered their tracks. It sucks when you put your trust in someone to take care of your money and they screw you over just to line their pockets with what’s practically your money. A giant bank cheats the little guys, and the executives line their pockets.