Wells Fargo Scheme

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Have banks learned nothing from the 2007 financial crisis they caused? I’ll let you be the judge of that.

Wells Fargo is in hot water with the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the City and County of Los Angeles.

According to the City of Los Angeles, Wells Fargo has been sued for 3 things.


“Bundling” requires a person wanting one product, to buy additional ones. This is a typical “up-sell” business strategy – Can I get fries with that?


This is “bundling” products.

In Wells Fargo’s case, they opened additional accounts without the awareness or authorization of their customer – Bad Wells Fargo. In fact, 1.5 Million unauthorized accounts where opened and often by creating fake customer emails.

It’s suggested that anyone wanting to know if an unauthorized account has been opened in their name should check their credit report.

Need to check your report? Get your credit report for free here >>


In addition to the 1.5 million fraudulent accounts being opened, the law suit alleged employees also engaged in “pinning”, which allows a banker to create a debit card PIN number, often without customer authorization, in order to enroll a customer in online banking.

The goal of this scheme was not really to make money through fees on the bundled products. CFPB’s complaint states that only 85,000 of the 1.5 million fake accounts incurred fees (of about $2 million), and just 14,000 of the half-million unauthorized credit cards incurred fees (of about $400,000).

$2.4 million doesn’t even move the needle for a bank with $5.6 billion in quarterly profits. So the “bundling” and “pinning” was a by-product of Wells Fargo’s larger scheme.


To meet aggressive sales goals Wells Fargo has pressured their employees to meet “unrealistic sales quotas”, and threatening to fire them. As a result, 5,300 employees have been fired over the past 5 years.

To argue a point, you’d have a tough time organizing 5,300 people into a conspiracy, which lends to the idea that this was a result of Wells Fargo bullying their employees. It’s well argued that this was less a conspiracy and more a revolt.

So what is “Sandbagging”? This is when a banker delays opening new accounts or processing a sale until a time that is most beneficial, such as a new sales reporting period.

In Wells Fargo’s case, their stocks continued to rise as a direct result of this, (doubled from 2011-2015,) and executives got huge paydays. In legal terms, this is the definition of Securities Fraud.

When the smoke cleared, Wells Fargo was ordered to pay a combined $185 million to the 3 departments listed in the beginning of this post. FYI, $185 million = 3 days of bank profits. 

Slap on the wrist?

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Source: The Fiscal Times

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