Wells Fargo Doesn’t Need Your Business

Posted on September 13, 2016

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If you haven’t already heard, San Francisco based Wells Fargo bank recently fired 5,300 workers for fraudulently opening over two million accounts without customers knowledge.

They also agreed to pay a 100 million dollar fine to the Consumer Financial Protection Bureau who stepped in and intervened on customers behalf rather than force each and every one to independently arbitrate claims – as well as pay 35 million dollars to the comptroller of the currency and 50 million dollars to the City & County of Los Angeles who initially kicked off the investigation in 2013 and agreed to pay a paltry 5 million dollars in restitution to victims.

The head of community banking who came up with and managed this swell plan called internally Gr-Eight, sought to get each customer to sign up for eight Wells Fargo financial products as a way of meeting sales goals. IE if you want to keep your job or performance bonuses, you need to meet sales goals. Carrie Tolstedt, the executive in charge announced her retirement this year and is expected to walk away with a retirement package worth 125 million dollars.

She should get the bare minimum required by her contract, have her compensation package clawed back and be fired well before she retires by the end of this year and Wells Fargo should do this immediately. In the meantime, investors should divest and depositors should consider the benefits of credit unions for their banking services, who will be far more considerate to your plight when it comes to the next subject.

What has not been mentioned about this settlement that we can find is the use of ChexSystems and credit bureaus to punish their customers who had insufficient funds on accounts they never knew about or never made payments on credit accounts they didn’t authorize. In both cases, such reporting has been used in the past to force customer retention by other banks and here is how it works:

Customer has non-sufficient funds on an account they did not know about and never authorized for 90 days or longer. These accounts are reported to chexsystems and these customers are, in effect, banned from moving their accounts to another bank because chexsystems has you registered as, in effect, a bank account deadbeat.

It matters not that you might have a half million dollars spread across a dozen or more of their financial products with the bank that reported you. It was that negative 90 dollars in the account that you did not know about or did not authorize that has you locked in to business with them for another 10 years.

If you try to take your business elsewhere (and we strongly advise against taking your hard earned dollars anywhere that is too big to fail)  the first thing they do is run a chexsystems report and up pops that nsf entry for an account you never authorized. Fight as you may, chexsystems intends to leave that entry in their database for 10 years. As a result, no other bank will give you the time of day, much less a bank account. But your current bank that reported you gets to keep you as a captive customer for 10 long years because they know the real story and are all too willing to take your fees for their services since you’re a captive customer.

Such scenarios played out in earnest in the banking mergers of the late eighties and early 1990’s which was essentially pre-internet for the most part. Banks would acquire other banks and change the account numbers of their acquired. Mysteriously and without any explanation, inevitably one of many account numbers would be changed, the customers not notified and they would be reported to chexsystems when the account they were not notified about went negative as automatic deposits were rejected and automatic payments made. In some cases, funds were forfeited to the state controllers office without any identifying information that would permit depositors to reclaim their lost accounts as fees continued to accrue. This allowed the big banks to assure themselves customer retention through mergers because customers were locked in to their current bank that reported them, unable to move their accounts elsewhere for ten years.

Now, the reason we recommend considering a credit union is because lots of credit unions (but not all credit unions) caught on to this behavior by big banks and would open new probationary accounts for the victims of mergers in spite of a chexsystems entry when you just sat down with one of their banking managers and explained the situation.

In a nutshell: We think you should consider moving your hard earned cash from Wells Fargo to a credit union regardless of whether or not you were impacted. If you are purchasing a new car, insist that Wells Fargo Dealer Services (one of the largest subprime financiers with some of the largest dealer spreads – or the additional interest range in what a dealer will charge you so they can make money off the finance contract…) not finance the transaction. If you are a credit union member, you already know the interest rates on credit cards and auto loans are far better than any bank and most auto dealers can offer you.

http://money.cnn.com/2016/09/13/investing/wells-fargo-scandal-stock-jpmorgan/index.html