Wells Fargo: A Company Rose From Cross Selling Fraudulent
One of the biggest banks in USA history was established in 1852. Its important history and sincerity to customers make it indispensable. The most important characteristic of the bank is cross-selling. Cross-selling is selling related or different services or products to existing customers. This way, companies can receive higher profits from a customer.
However, banks cannot sell these products arbitrarily. Before selling any product, banks have to get the consent of the customer. The requirement of consent in legal actions is a substantial way to prevent malicious people to act on people’s behalf. However, Wells Fargo did not pay enough attention to this norm. This way, they reached beyond their capacity.
Beginning of the 2000s, Wells Fargo started to use this feature more persistently. The company set higher quotas for the employees which cannot be achieved by taking the consent of the customer. The supervisors of the employees dictated them not to take the consent of the customer for cross-selling. Employees chose unethical ways to meet these quotas. As a result, the company sold millions of products to customers who were not aware that they were charged. They sold customers, products they did not need or could not afford. Simply, the bank made money by lending out at a higher rate than it borrows.
These cross-selling activities started way before Consumer Financial Protection Bureau (CFPR) founded. Simply, CFPR is an establishment which protects the rights of the customer and enforces the law on unlawful companies. In this case, it was going to be Wells Fargo. These actions of Wells Fargo stayed unabated until 2016. After that point, authorities realized how much this fraudulent scandal was big. In September of that year, federal regulators had documented more than 2 million fake bank and credit card accounts that were opened between 2011 and 2016.[1]The financial damage of the fake account scandal tumbled down over to customers. A lot of customers who have low income were unable to bear this burden. This caused a lot of people to have abysmal credit scores.
Authorities finally started an investigation against Wells Fargo and federal regulators took aggressive enforcement against Wells Fargo. In 2016, the bank agreed to pay $100 million in fines to the CFPB for various violations of the Consumer Financial Protection Act and to set aside an additional $5 million for compensating defrauded customers. As part of the settlement, Wells Fargo also agreed to pay $35 million to the federal Office of the Comptroller of the Currency and $50 million to the city of Los Angeles.[2]
However, this compensation did not cover all the financial damage given by Wells Fargo. Wells-Fargo forced its ways to close this investigation by arbitration. It turned out, that Wells Fargo put a forced arbitration clause in contracts signed by customers. Wells-Fargo sought its way for forced arbitration clause. Obviously, judge in that case ultimately denied Wells Fargo’s motion to compel the plaintiffs to pursue their claims through arbitration.[3]
Since, forced arbitration clause has denied, customers who are affected can pursue litigation for their damages. According to the court, these cases can encourage the ones who are also affected by this scandal. Finally, the wrongdoing of Wells-Fargo will may be compensated correctly.
Today, the case of Wells-Fargo is pending. CPFR realized that fraudulent goes way back to early 2000’s when there are not many regulations in the area. In 2017, settlement with Wells-Fargo may not have been perfect for full compensation, but it especially helped a lot of people who have low income. According to settlement, the total amount Wells-Fargo charged of is 3$Billion. When compared to first arbitration deal there are huge differences between the numbers. First deal was 142$Million. It shows us how much valuable for people to pursue their rights in court and how it can affect and change a lot of lives.
Sources:
http://progressivereform.org/our-work/consumer-protection/civjustice_wellsfargo/
[1] Michael Corkery, Wells Fargo Fined $185 Million for Fraudulently Opening Accounts, N.Y. Times, Sept. 9, 2016, at B1, available at
[2] Kevin McCoy, Wells Fargo Fined $185M for Fake Accounts; 5,300 Were Fired, USA Today, Sept. 8, 2016,
[3] Rob Tricchinell, Wells Fargo’s Sloan Takes Heat on Use of Forced Arbitration, Bloomberg BNA, Oct. 3, 2017
