Wells Fargo Fires 5,300 For Engaging In Massive Fraud, Creating Over 2 Million Fake Accounts

Tyler Durden's picture

For years we have wondered why Wells Fargo, America's largest mortgage lender, is also Warren Buffett's favorite bank. Now we know why.

On Thursday, Wells Fargo was fined $185 million, (including a $100 million penalty from the Consumer Financial Protection Bureau, the largest penalty the agency has ever issued) for engaging in pervasive fraud over the years which included opening credit cards secretly without a customer’s consent, creating fake email accounts to sign up customers for online banking services, and forcing customers to accumulate late fees on accounts they never even knew they had. Regulators said such illegal sales practices had been going on since at least 2011.

In all, Wells opened 1.5 million bank accounts and "applied" for 565,000 credit cards that were not authorized by their customers.

Wells Fargo told to CNN that it had fired 5,300 employees related to the shady behavior over the last few years. The firings represent about 1% of its workforce and took place over several years.  The fired workers went to far as to create phony PIN numbers and fake email addresses to enroll customers in online banking services, the CFPB said.

How Wells perpetrated fraud is that its employees moved funds from customers' existing accounts into newly-created accounts without their knowledge or consent, regulators say. The CFPB described this practice as "widespread" and led to customers being charged for insufficient funds or overdraft fees, because the money was not in their original accounts. Additionally, Wells Fargo employees also submitted applications for 565,443 credit card accounts without their knowledge or consent, the CFPB said the analysis found. Many customers who had unauthorized credit cards opened in their names were hit by annual fees, interest charges and other fees.

According to the NYT, regulators said the bank’s employees had been motivated to open the unauthorized accounts by compensation policies that rewarded them for drumming up new business. Many current and former Wells employees told regulators they had felt extreme pressure to expand the number of new accounts at the bank.

And, since it is US government policy never to send a banker to prison, they thought that engaging in criminal behavior was not such a bad idea.

Federal banking regulators said the practices reflected serious flaws in the internal culture and oversight at Wells Fargo, one of the nation’s largest banks.

"Today's action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences," said CFPB Director Richard Cordray. He added that “unchecked incentives can lead to serious consumer harm, and that is what happened here."

"Consumers must be able to trust their banks. They should never be taken advantage of," said Mike Feuer, the Los Angeles City Attorney who joined the settlement.

On its behalf Wells fargo issued a statement saying it “is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request,” the bank said in a statement adding that "at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action."

As the NYT puts it, "this is an ugly moment for Wells Fargo, one of the few large American banks that have managed to produce consistent profit increases since the financial crisis." Now we know one of the reasons why.

As CNN redundantly adds, "the scope of the scandal is shocking."

And since nobody will go to prison, in a few months we will read another such "shocking scandal" perpetrated by another bailed-out bank.

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cossack55's picture

Move them to Iceland

Jim Sampson's picture

Makes you wonder what else shady is going on.  Well, besides everything banks do.

Captain Benny's picture

I've talked to multiple people that worked at Wells Fargo over the years.  They all say they were pressured to upsell and create new accounts for customers.  Their job as bank tellers wasn't to service accounts, it was to sell extras that customers didn't want, need, or benefit from.

VD's picture

one of my WF credit cards was being hit with $1 late fees randomly on a longstanding month end balance of $0, so am not surprised at all. these fines should go straight to all customers that were scammed vs some gov agency black hole...

chunga's picture

Everybody with a Wells Fargo credit card should stop paying, then sue them.

Manthong's picture

I do not know whether to get angry or just vomit.

chunga's picture

It takes a while to sink this in. You know if everybody disputed the debt and went to court over this, the courts would rule in favor of Wells 99.9999% of the time just like they did in the fraudclosure thing. The banks won like 7 million lawsuits in a row in that one.

 

"Wells opened 1.5 million bank accounts and "applied" for 565,000 credit cards that were not authorized by their customers."

beemasters's picture

It's just fishy they were fired without criminal charges. Is the bank trying to protect them or trying to protect the management who is probably guilty too?

The Alarmist's picture

Uncle Warren is actually a supreme asset-stripper.  This news is actually not very surprising.

Joe Davola's picture

I saw 2 million fake accounts and immediately figured this was an article about Obamacare, but yeah I can see the stagecoach rolling this way also.

Ms. Erable's picture

As part of their severance packages, each of the 5,300 former WF employees received a nailgun as a reminder to not disclose the email from corporate management directing them to take said actions 'to boost the economy'.

de3de8's picture

Racketeering everywhere, it's the new growth model.

ufos8mycow's picture

There is nothing in the Constitution that says Americans have the right to refuse credit. Case closed.

NoDebt's picture

OK, so let's talk a little about why these banks SHOULD be broken up (a long time ago, not just today).  Aside from doing this just to punish them for outright fraud, let's back up and realize a few things that SHOULD, under regular circumstances, cause a break up:

1.  Many of them have stock prices that are trading BELOW TANGIBLE BOOK VALUE.  If you don't know what this means, here's the short version:  they are worth more sold off in pieces than as a single entity.  Possibly a lot more, depending on what pieces are seen as having higher than "stated" value on the balance sheet.  Tangible book value is a total rock-bottom "shit hits the fan" valuation- a very low hurdle to clear, in theory.

2.  Having banks this size it is self-evident they are unmanageable given their track record.  If they were to be broken up the various parts could compete more effectively and unlock more shareholder value while lowering costs to consumers.

 

Wow, NoDebt, that sounds awesome!  Why hasn't anyone done it?  Because reasons:

1.  Even at "tangible book value" the money doesn't work.  Why?  Because even tangible book value is way too high.  Why?  Because they are LYING.  Their parts are NOT worth what they claim on their balance sheet.  Not even close.

2.  They are protected wards of the state.  Government created the problem of "too big to fail" banks and now, instead of fixing it the right way (breaking them up) it's more advantageous for the government to create YET ANOTHER bureaucracy to regulate and oversee them IN ADDITION TO the dozen or so government agencies that ALREADY regulate them.  Governments create problems so they can come up with more government solutions to fix the problem.

 

If you aren't drinking by now, you should be.  I am.

 

 

conscious being's picture

NoDebt, you're great, but you're waisting your time making that argument. I have a feeling the whirlwind is about to kick it up a notch and when things cslm down again, the banks as we know tgem will be gone. Everyone is going to raid SA soon. Plenty of reasons. Houthis have exposed how well prepared the Saudis are.

How can you have a petrol$ w/o KSA?

Houthis look like they cannot be stopped in KSA. Very impressive.

Manthong's picture

Blame Putin… damn rooskies are trying to undermine our financial system.

Lore's picture

Comment-quote of the year: "Governments create problems so they can come up with more government solutions to fix the problem."  I see this crisis creation bullshit every day in local municipal government: create a problem, bring in a bunch of government agencies to feed it, let trouble escalate, then roll out another program to regulate the problem.  I used to think the movie BRAZIL was mere comedy. 

NOBODY GOES TO JAIL?!  SERIOUSLY?!?

So much for Rule of Law. 

factgasm's picture

It doesn't have to be in the Constitution, it's a matter of contract law.

A person only has the right to act in your name if you have granted them your power of attorney to do so. By that token a credit agreement cannot be created without the borrower's prior consent. These credit agreements were created without the borrowers consent before the recipient was even made aware the credit was available to them and were hence illegal from the start (or should be considered so under the law).

It's like simply giving someone the keys to your car then watching them drive it away without a word being said. You then send them a letter saying 'By taking my car you implied that you accepted the terms of my contract. You owe me $50,000. Pay up or else'.

Still what do I f*cking well care, humans f*ck each other and the Earth over so badly we won't be here much longer anyway. The war is already lost. It was baked in the cake from the start. Humans are just too duplicitous and destructive. Something else will replace us. Maybe nature will start again but this time with the mice.

jeff montanye's picture

i was working with my middle school granddaughter on to kill a mockingbird this afternoon when the word lynch came up and she didn't know it.  i told her some of the darker history of the u.s. and mentioned that in some ways things were better now, that we had a black female named lynch as our top law enforcement officer serving under a somewhat black president.

unpleasantly i had to add that it would be much better if they weren't both corrupt, like many of the white versions that preceded them.

cheka's picture

teach her some real stuff.  or are you going to wait until she's in the hospital or dead...a victim of vibrant crime ignorance 

Manthong's picture

..but don't you kind of wish some justice could occur in the DOJ?

..even if it involved some rope?

PT's picture

Dr Evil:  "Let's fine them.  185 million dollars!!!"

slicktroutman's picture

That's ok they still netted out plus 500 million, the CEO's got record bonuses and no one went to jail. The govt got their cut too. Welcome to America, and we bad mouth Russia ?????????? Give me a break, what a banana republic we've become. Disgusting.

August's picture

Well, as long as the profits derived from criminal "banking" activity are shared with the Feds via fines, there's really zero reason to put a stop to it. 

You know, aside from that "rule of law" shit, that only some rube would pay attention to.

CHX's picture

 

If (FINE-sum(costs))>0 then go to start...

Manthong's picture

Please do not disparage banana republics by attempting to compare them to the thoroughly rotten to the core corrupt U.S.

This government make Brazil look like the Vatican.

Awshit... Brazil makes the vatican look like  Nazi Germany ....

Nazi Germany makes the   ????   WTF ????

awshit.. awshit... this downward spiral has no bottom..

except the steaming hot cowpie that Obama, Lynch, Comey, the Clintons et al thrive upon... like flies.

Bahamas's picture

ol' yella will print the money on request to pay for the fine

ToSoft4Truth's picture

But Buffet is cute.  Warren eats Fudgesicles with the little kids down by the community swimming pool. 

0b1knob's picture

Here's an idea for Wells Fargo and other banks.   Why don't you just pay a FAIR INTEREST RATE on deposits.  An interest rate greater than the current inflation rate.  People using other banks would close their accounts and move to Wells Fargo.

 

I know.   Fairness.   Honesty.   I'm such a dreamer.   But it's such a crazy idea IT JUST MIGHT WORK!

in4mayshun's picture

Why would they do that when the FED gives them money for almost no interest?

CheapBastard's picture

Tell me again, how many have been indicted?

Doom Porn Star's picture

ZERO.

NONE.

NADA.

ZILCH.

NOBODY.

But the good news is that the upper management of Wells Fargo WILL receive many a stock option and fat year end bonuses!

Manthong's picture

Well, it’s not as if they were sneaking nickels into their pants before leaving for home.

Nickels… the only real money left in a bank.

PT's picture

In other good news, while the customer accounts were faked and fraud, WF still gets to keep all the derivatives based on those accounts ...

Yes, I'm guessing, but would you be surprised?  Next guess:  Derivatives exist that are a hopelessly entangled mess of both real and fraudulent accounts.  Do I get a cookie?

PTR's picture

No, but you do have a choice of a foreclosure notice or a bail-in haircut on your new account.

Doom Porn Star's picture

Um, half a cookie.

A coconut cookie.

Nobody For President's picture

Of course management will get bonuses. Look at the reduction in headcount!

Colonel Klink's picture

Here's a better idea.  STOP banking with the majors, pull all your money out.  Use a credit union.

slicktroutman's picture

Moving money Wells Fargo is like going to work for the mob. Actually Wells makes the mob look like alter boys.

neidermeyer's picture

But Buffet is cute.  Warren eats Fudgesicles with the little kids down by the community swimming pool. While he has donated enough money to Klanned Parenthood to pay for the murder of about 2,000,000 children. I wouldn't want to be Warren or Gates.

ToSoft4Truth's picture

In St. Michael's name attack at dawn? 

larz's picture

Buffet another progressive  POS

GRDguy's picture

Yep, that's what happens when one works for the Buffett Plantation. You do what you're told, and still get fired.

Doom Porn Star's picture

Buffett = Crime Boss.

Whether he/you/they realize it or not: it has been confirmed today by none other than the US govenment with this ruling..

Bunga Bunga's picture

A business an idiot can run .. so true.

Squid-puppets a-go-go's picture

even I'm shocked at this, and I'm one cynical motherfucker.  Not cynical enough I now realise

edit: And these fuckers have the temerity to be the arbitreurs of our populations 'credit scores'... I wonder how mny credit scores have been negatively impacted as a result of this?

Nylsaar's picture

I must be cynical, because I wonder how many of these fake accounts voted.

Stuck on Zero's picture

My guess is that every fraudulent account at wells Fargo was associated with a Facebook page, Twitter account, and Instagram persona.