Wells Fargo is still reeling in the aftermath of a major scandal, the latest news being that the banking behemoth lost its accreditation from the Better Business Bureau. While perhaps not an extinction level event, think of this as getting panned by Ben Brantley of the New York Times on the opening night of your $50 million Broadway show.
So here's a question right up there with jelly bean jar guesses at the number of lawsuits Donald Trump will be filing on November 9: In today's world of finance, is it plausible, or even conceivable, that this practice is unique to Wells Fargo?
As The Donald might say, leaning toward his microphone--his short index finger jabbing at the ceiling: "Wrong."
The Comptroller of the Currency, Thomas Curry, said as much during a hearing when he announced that the OCC was investigating whether employees at other banks created fake accounts.
Since you can't know until a news story breaks, the smart money is on assuming the worst and taking all necessary precautions.
The reason consumers should be concerned that their bank might have done the same thing has everything to do with the culture at most financial institutions where "too big to fail" is a partial thought, the rest of the sentence ending "to hit impossible revenue goals."
Do you honestly believe that Wells Fargo is the only bank that pushes its employees to turn water into wine on a daily basis? There is an immense amount of pressure to both increase the customer footprint and grow the bottom line anywhere financial products are made available.
On September 8, the Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency (OCC) and the Los Angeles City Attorney announced they had levied a $185 million fine on Wells Fargo for "ghost" accounts opened by the bank's employees to increase revenue and sales figures at the expense of consumers. The CFPB portion of the fine--$100 million-- represents the largest penalty ever assessed against a financial institution by that agency.
The problem: Millions of unauthorized bank and credit card accounts were opened by Wells Fargo employees between May 2011 and June 2015 (a timeline that may grow longer as the investigation evolves). According to reports, the shady practice of opening these unauthorized accounts, known as "sandbagging," was rampant as a direct result of the corporate culture at Wells Fargo where, like other banks, there is a tremendous amount of pressure to show constant and robust growth.
According to the CFPB, "Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses."
In their statement, the regulators allege that these ghost accounts racked up an assortment of fees and charges that hurt consumers while enriching Wells Fargo employees and appeasing management.
When news of this debacle hit the press, both houses of Congress convened hearings--the most noteworthy was held by the Senate Banking Committee on September 20th, where Elizabeth Warren took Wells Fargo CEO John Stumpf to the woodshed. She demanded his resignation and the forfeiture of any compensation or benefits he had received during past few years and suggested that he be criminally investigated. Within a couple of weeks, he agreed to forfeit at least $41 million in unvested stock options and "retired." And, it's now old news that the head of the department where all the mischief occurred, Carrie Tolstedt, left the company earlier this year.
A little background on Tolstedt: She got a $124.6 million platinum parachute, but in the harsh glare of the public disclosures has given up some $19 million in retirement benefits.
The company has said it fired over 5300 employees implicated in these schemes over the past few years. But so what? This "sandbagging" included actions that should really be categorized as identity theft--right down to the creation of bogus email accounts, PIN numbers and pulling credit reports for new credit cards without the knowledge and consent of the consumer--the type of fraudulent activity that should count as "big league" crimes. Indeed, California Attorney General Kamala Harris is now looking at bringing precisely these charges against Wells Fargo.
While it was great tv for many to watch Senator Warren grill Mr. Stumpf, it's not going to be much fun if you learn that your bank was doing the same thing and you've been the victim of what I'm going to call Institutional Identity Theft.
Don't Get Got
For every cockroach you see, there's a thousand in the walls. One has to assume a similar situation in the realm of bankers behaving badly.
As I detail in my book, Swiped, the smartest way to navigate this fraud-filled world we live in is to practice the 3 M's to the best of your ability. They are: Minimize your exposure, monitor your accounts, and manage the damage when you discover you've become a victim.
Here are a few precautions you should take today: Check your credit report, which you can do for free once a year. Note that while credit cards will appear on that report, a new savings or checking account or IRA won't. Check your bank statements for penalty fees (ghost accounts are always low-balance and can thus incur charges), and consider setting up transaction notifications, which can be set to alert you whenever any activity occurs in your account. But in order to be certain you have not been sandbagged, you still need to do more: contact your bank and ask them to provide you with a list of all your accounts.
Never forget, the ultimate guardian of the consumer is the consumer. No one has a greater stake in your financial security than you do. Only you can stop the banks from sandbagging you.