Wells Fargo – The Consumer Corner Podcast

Welcome to The Consumer Corner. This is a podcast that focuses on protecting the consumer from Corporate America.

  • One of the things we are going to talk about is different companies that have harmed consumers. Sometimes these stories will be newsworthy, other times they might fly under the radar so to speak.

In today’s episode, we will talk about Wells Fargo Bank and the scandals that hurt its reputation over the years. We will also talk about some of the things they are doing today….right this minute to harm you, the consumer.


Wells Fargo has always appeared to have a reputation for good management.

  • was able to float and survive recessions with little or no effect on its operating and stock price performance.

 Fortune magazine claimed that Wells Fargo had a history of avoiding the rest of the industry’s dumbest mistakes’ and

American Bankers referred to it as ‘the big bank least tarnished by the scandals and reputation crises.’ We should probably take a closer look at that quote though.

  • It seems akin to saying Jim was the mafia hitman with the least number of kills. He still killed a bunch of folks, but not as many as Jack and Jane did.
  • This was all before 2013 though. In 2013, American Banker named the then Chairman and CEO, John Stumpf, ‘ Banker of the Year.’
  • Carrie Tolstedt who ran the retail banking division was also named ‘Most Powerful Woman in Banking.’
  • In 2015, the bank was ranked 7th on Barron’s list of most respected companies.

According to Wells Fargo:

  • The success of the company has been built on a cultural and economic platform that merges deep customer relations and an engaged sales culture.
  • The company’s philosophy is to satisfy the customers’ needs and help them excel financially.
  • They have always emphasized that their main purpose is to do things the right way and do it in the customers’ interest.
  • Not about the popularity of the company or to push their products, but for building long-standing relationships with every customer.
  • The company claims to take its vision very seriously as it is the center of its culture and important to its success.
  • The strife to be recognized by stakeholders for their integrity and principled performance is what drives them to always put their customers first at all times.
  • I am trying not to laugh because I know how this song ends.

History of Wells Fargo

  • Began its banking activities in 1852.
  • Evolved from being a cross-country express service into one of the biggest retail banks in the world.
  • Stands as the fourth largest bank in America, Wells Fargo has been plagued by quite a few recent scandals, and
    • I suspect more are to come as they try to eke out just one more dollar from each of their current, future, and past customers.
  • One of the challenges these larger companies have is continuing the growth their investors expect based on past performance.
    • Unfortunately, in most industries, there is only so far you can go without cross a line.
    • The market can only bear so much. Eventually, you just run out of potential customers. I think being as big as they are, they have hit that peak. So they had to look for creative, albeit illegal, way to increase the perception of growth to satisfy their shareholders.

2013 – Cross Selling

The first scandal that Wells Fargo Bank had to deal with was the cross-selling scandal.

  • Cross-selling means that the number of products a consumer/customer bought determined how much information the bank had about them.
  •  More purchased products equaled more customer information to the bank. Cross-selling was part of the businesses of Wells Fargo.
  • In 2013, there were rumors that Wells Fargo employees in Southern California engaged in tactics termed as aggressive to meet the cross-selling daily targets.
  • It was later discovered that employees at the bank were opening accounts and issuing debit or credit cards to people without their knowledge and consent.
  • They fired about 30 employees for this fraudulent activity discovered among the workers at Wells Fargo.
  • While addressing the public, the company spokesman stated those who were found were only a few out of a large number of employees in the company.
  • He also put the fault on the employees by saying, ‘Our team members do have goals. And sometimes, they can be blinded by a goal.
  • Did that mean that the employees acted on their own, without any push from seniors at the company?  I doubt it. I am sure bonuses and other monetary incentives were dependent on employees increasing those numbers. That is the point of a goal.
  • Some alleged the bank had a practice of setting daily sales targets, of which some might have been too high. The employees were put under a lot of pressure to reach each day’s target because there were financial incentives for those who were able to reach the daily targets.
  • Who would not want to work hard to earn more money? You guessed right, Nobody!
  • When the targets of a particular day were not met, the shortfall was added to the next day’s goal, which was already high on its own before the addition.
  •  It was alleged that the high figures of the target must have pushed employees to find a way around it which led them to use aggressive and unethical tactics like forcing accounts and products on people who knew nothing or were not interested in the products.
  • Many of the Senior management of the company claimed that they were unaware of the scandal or that the employees were put under so much pressure to meet these goals.
  •  But in 2016, Wells Fargo admitted that their employees had opened about 2 million accounts without the customers’ permission over five years and announced that they would pay $ 185 million to settle the lawsuit filed by regulators and the city of Los Angeles.
  • The bank stated:
    • committed to putting their customers’ interests first all the time and
    •  would take responsibility for instances where customers received products that they had not requested.
  • The fine paid was little compared to what other financial institutions have had to pay to settle violations, but that was the deal they were able to strike.
  • Wells Fargo’s stock price also dropped by 2 % which did not significantly impact their economic stability as a bank.
  • Following the lawsuit, the bank took action.  
  • Hired a supposed independent firm that reviewed account openings since 2011 to discover unauthorized accounts.
    • Claim to have refunded more than 2 million to customers for fees accrued by the existence of those accounts.
    • Over 5000 of their employees lost their jobs over five years, and the Head of the retail banking division, Carrie Tolstedt, retired, probably with a nice severance. Wonder if the 5,000 folks just doing her bidding got a severance. I doubt it.

These actions could not reverse the damages to their reputation that had already been done.

  • Then CEO of Wells Fargo, John Stumpf, appeared before the U.S. Senate, and they did not spare him.
  • Senators criticized the company for the fraudulent acts and for putting insane pressure on low-level employees to enrich their pockets.
  • They were critical about how many low-level employees had their jobs taken away.

Still, nothing was taken from the huge salaries of the CEO and the Head of the retail banking division, who had retired earlier.

  • Senator Elizabeth Warren of Massachusetts pointed out the unfairness in the way the discipline was meted like it was the fault of the low-level employees.
  • Explained that with the gravity of the offense, a more severe approach should be taken.
  • Stressing that if it were a low-level employee who stole from the company, he might have ended up in prison.
  • Still, they are just walking freely even after pushing employees beyond their breaking points to drive up the company’s stock value and fatten their pockets.

Stumpf and Tolstedt

  • Later asked to forfeit millions of dollars in equity awards
  • both did not receive any bonus for 2016.
  • Shortly after, Stumpf resigned without an explanation, (probably had hurt feelings) and the Chief Operating Officer, Tim Sloan, became CEO.
  • After the Los Angeles City Attorney lawsuit, the board of directors hired a third-party consultant to look into sales practices and analyze how much customer harm the company must have caused.
  •  With the release of the report, Wells Fargo announced actions that would help strengthen the control functions within the company. Probably ways so they wouldn’t get caught again.
  •  In addition, they claimed to have clawed back an additional $75 million dollars from Stumpf and Tolstedt.

The Federal Reserve Board

  • placed a strict limit on the company’s asset size, forbidding the bank to grow past the $1.95 trillion it had in assets at year-end.
  • This limit was to remain until the bank demonstrated an improvement in managing all its risks and protecting its customers.
  • This decision was taken for customers’ safety so that misconduct that might cause harm to customers can be avoided and there would not be a repeat of mistakes.
  • Alright Billy, no more buffets for you until you prove you won’t hurt someone with the forks again. Once you prove you can eat safely, you can have all the food again. And I mean all of it.

2018 Auto and Mortgage Lending Scandal

  • April 2018, the bank agreed to pay $1 billion in settlement to the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency to resolve auto and mortgage lending violations that came up.
  • This was not the only issue.
  • After settling mortgage violations Wells Fargo agreed to pay another $480 million to settle a securities class action lawsuit over cross-selling.
  •  (Maybe Explain the securities class action).
  • As the great Billy Mays once said, “but wait, there’s more!”
    • The company had to settle with 50 state attorneys in December to resolve civil claims for cross-selling, auto lending, and mortgage lending violations and agreed to pay $575 million dollars.
    • Based on quick math, that is over $2 billion in one year. Sounds like a lot, but remember they have, or had, almost $2 Trillion in Assets.


  • Treasury Department officials issued a report in January 2020 on the Wells Fargo account scandal.
    • The report discovered that the bank’s business model ‘imposed intentionally unreasonable sales goals and unreasonable pressure on its employees to meet those goals and fostered an atmosphere that perpetuated improper and illegal conduct.’
  • The former Head of the retail banking division was fined $25 million, Stumpf was fined $17.5 million and received a lifetime ban from the banking industry.
    • So no hall of fame for him….well actually he will probably still be in the hall of fame. It is legal to gamble in banking.
  • The cities of Sacramento, Philadelphia, Miami, and Oakland also sued the bank for giving unfavorable mortgage plans to Black and Latino home buyers.
    • Brokers selling the company’s mortgages discriminated against Black and Latino borrowers between 2004 and 2009.
      • Roughly 34,000 cases were discovered after a government probe that the bank charged non-white customers higher rates though they had similar credit profiles with white customers.
        • What is interesting to me is that only Wells Fargo got caught.

        • This scam should only work if all the banks are doing it. Or they were being deceitful in the mortgage origination process and borrowers didn’t realize they were paying more with Wells Fargo.
  • There are a number of ways to do this such as variable interest rates or misleading explanations as to monthly payments.
    • Or maybe their goal was to only lend to white folks. Maybe Wells Fargo is just a cover for their real name….White Folks. Same initials, right? I am making that up, but you never know.
  • U.S. Justice Department’s Civil Rights Division brought suit against Wells Fargo and it was announced that Wells Fargo would pay $175 million as a settlement for the discrimination suit.

  • The Assistant Attorney General for the Justice Department’s Civil Rights Division, Thomas Perez, claimed that the documents from the Wells Fargo case indicated that the bank engaged in steering minority customers to loans with higher interest rates, and rewards were given to employees who were able to successfully do so.
  • Perez said the bank should have done a better job monitoring those practices to avoid those perverse actions.
    • The incentives put in place by Wells Fargo did not take their customers’ interests into account.
    • They only did what was going to benefit the company.


What is Wells Fargo doing today to harm consumers?

  • Like most banks, consumers are required to agree to arbitration if you open an account with them.
    • They won’t do business with you unless you contract away your constitutional right to a jury trial.
    • This is replaced by a hearing in front of a company that gets almost all its business from the banking industry.
      • I am not saying they work for the banks….but that is who pays their bills.
      • You can draw your own assumptions.
  • It is also pretty telling that the bank that wants to work in your best interest won’t let you sue them if they break the law.
    • Maybe it is because that most arbitration proceedings are confidential. So even if they are ‘caught red-handed’, no one else can find out. Their excuse is likely that all banks do this…..

Elderly Clients

  • I also have been getting quite a few elderly clients that have been sued by Wells Fargo. These are folks in their 80s and 90s who have no money.
  • They know they have no money and no money they can garnish, but they still hire a law firm to sue these people.
  • As far as I can tell, their plan is to harass them with a judgment and post-judgment discovery until these folks break down and beg family members to pay Wells Fargo.
  • Remember the cross-selling ‘goals’ that incentivized the account reps, Wells Fargo incentivizes the law firms collecting the money by giving them a large percentage of the money collected. Probably 33-40%.
  • In my opinion, they seem to lean toward using the more unethical and pushy firms when it comes to collecting.
    • I am not speaking for all of them obviously, but some of the ones I have dealt with just do not treat anyone with any dignity or respect.

For example:

  • In the Wells Fargo agreement, the consumer is forced to sign, there is an arbitration clause. Now what this means is, Wells Fargo already has a plan in place to solve any disputes that could come up between them and the consumer.
  • But, this plan is one-sided. If Wells Fargo wants to sue the consumer, Wells Fargo “forgets” about this arbitration clause.
  • It turns out that they don’t actually want to do this when they are trying to sue on a debt because it costs a lot of money and isn’t as quick as getting a default judgment against someone who is too old to know how to respond to a complaint.
  • So they refuse to arbitrate. I think in just about every case I have had with them, they have refused to arbitrate, either until I filed a motion compelling arbitration or threatened to file one.
  • On top of that, they will continue to pursue the judgment and pay something around $6,000.00 to get a document that says they might be able to collect an amount that is not much more than that from someone who will never pay them because they have no income and no assets.
  • They know they will never get paid, yet they pay several thousand just to harass these people.
  • In at least one case, they know that at least some of the charges were fraudulent.
    • To say that their behavior is disgusting is an understatement.
    • To spend that kind of money knowing it will not benefit the company in any sense of the word seems odd.
    • Might be time for another securities class action from their investors.


But let’s remember that according to Wells Fargo:

  • The success of the company has been built on a cultural and economic platform that merges deep customer relations and an engaged sales culture.
  • The company’s philosophy is to satisfy the customers’ needs and help them excel financially.
  • Emphasize their main purpose is to do things the right way and do it in the customers’ interest.
  • Not about the popularity of the company or to push their products, but for building long-standing relationships with every customer.

If you still believe that, I have some land for sale in Arizona.

  • I bet Wells Fargo can set you up with a mortgage too.
  • You might have to sign up for 3 or 4 more products as well though.
  • When you fill out the credit app, I recommend selecting Caucasian as your race if you want to get a completive rate. Ironically though, lying on the app might be a crime with a jail sentence.

And that’s a wrap on today’s episode!

  • I hope you had a great time listening and maybe learned something.
  • I am always on the lookout for press releases or other reputable news sources about the misdeeds of this company or any financial company that is harming consumers. So, feel free to send those to me.
  •  Please leave a review about this episode if you are so inclined to do so.
  • You can:
    • Find me on twitter….sometimes at @cliff_carlson.
    • Find us on Facebook at @theconsumercorner or myself at @cliffcarlsonlaw
    • And find me on Instagram occasionly at cliff.carlson.law.
    • Remember to like and subscribe to the podcast, so you do not miss out on future episodes.
    • Also, please share this episode with others if you find it useful.

Have a wonderful week!


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