By The Herald Editorial Board
Not that anyone is surprised, but part of being “too big fail” means banks are simply fined and employees merely fired for practices that would, without a doubt, land someone outside the bank’s employ in prison for fraud.
To wit: Wells Fargo has been fined $185 million in civil penalties, and will pay $5 million to refund customers, for secretly opening millions of bank and credit card accounts in customers’ names since 2011, according to media reports. The bank earned unwarranted fees (charged to customers) and allowed Wells Fargo employees to boost their sales figures and earn more money, federal regulators said. Employees went so far as to create phony PIN numbers and fake email addresses to enroll customers in online banking services, according to the Consumer Financial Protection Bureau. CNNMoney reported that Wells Fargo confirmed that it had fired 5,300 employees over the last few years because of the scam.
The fact that it took years for the bank years to investigate itself (and only after it was sued) suggests that it wasn’t in the biggest hurry to root the fake accounts out. No doubt because the bank was benefiting from those unearned fees. The fines are just the latest of many penalties levied on Wells Fargo, USA Today reported. The bank faced or settled four key areas of litigation as of the end of 2015, including several with much larger settlements connected with: FHA insurance claims ($1.2 billion); Visa and Mastercard interchange fees ($6.6 billion); mortgage products ($10 billion); order of processing debit card payments ($203 million).
And Wells Fargo isn’t alone, or the most fined. Wells Fargo ranks fourth among global banks in terms of total value of fines paid over the past eight years at $10 billion, Robert Hockett, professor of law at Cornell Law told USA Today. Bank of America, JP Morgan Chase and Citigroup have paid more, $58 billion, $31 billion and $13 billion, respectively, during the same period.
Most other cases of recent alleged bank fraud are usually connected with mortgage lending or areas far from consumers and more associated with esoteric manipulations of interest rates, Hockett said. “What’s surprising is that with this latest scandal, it’s fraud with the garden variety types of accounts,” he said.
Yes, a garden-variety scam, targeting the banks’ own customers. Even though Wells Fargo has the highest market valuation among any bank in America, worth just north of $250 billion. So despite all the fines, new and old, Wells Fargo can easily afford them. Some punishment.
How the bank will respond to the stampede of departing customers remains to be seen. But it would be prudent for Wells Fargo customers to check their final statement for a one-time “closing account” fee. And all bank customers would do well to scour your statements for hidden fees, or fake accounts in your name. Thieves come in all stripes, including your bank where you keep your hard-earned money.
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