Wells, Wells, Wells, look who’s in the news again.
Wells Fargo will pay $3B to the SEC and DOJ in what might be one of the last chapters of its fake account scandal. Don’t remember what I’m talking about? Well, let’s take a trip down memory lane.
Look back at it
From 2002 to 2016, Wells Fargo employees opened up millions of fake accounts for customers without their notice, raking in dough from all of the associated fees. What was once alleged is now a fact, as the nation’s fourth-largest bank has admitted, finally, to setting unrealistic sales expectations, causing thousands of employees to open up these fake accounts or products for unsuspecting customers.
As part of this settlement, the bank admitted to collecting millions of dollars in unnecessary fees, harming customers’ credit ratings, and unlawfully misusing customers’ information. Pretty shady, even by financial institution standards. Wells will also enter into a three year deferment period where it will cooperate with all ongoing government investigations. It’s the least they can do.
And while you may be thinking “great, another bank is fined, but no one was held responsible,”… that’s not necessarily true. Last month US regulators charged several former executives, which included fining former CEO John Stumpf $17.5M for his role and banning him from the banking industry.
The bottom line…
Wells Fargo has paid over $7B in penalties since 2016. To put this in context, the bank’s net profit last year was $19.5B… so while this is not just a drop in the bucket, it is still a small amount to pay considering…
There’s still more headwinds to face, including hearings with the House Financial Services Committee, consent orders, and the unknown timeline of when its $2T asset cap, set by the US Federal Reserve in 2018, would be lifted.
Beyond legal matters, the bank will need to continue to revamp its sh*tty reputation, which will take years to rebuild. Maybe they can take some tips from HSBC, which helped terrorists, Iranians, and Mexican drug cartels launder money…
People don’t forget.