Nightmare building for Wells Fargo
Wells Fargo committed an egregious breach of consumer trust earlier this year. Maybe you’ve heard of it? In response to what they called impossible sales quotas, bank employees created more
than two million fake checking and credit card accounts using the personal data of actual clients.
As you might expect, the situation hit the headlines like a time bomb. Customers revolted, and even people who didn’t have accounts with Wells Fargo came out to denounce the company by the millions. Then the lawsuits started. And it’s no wonder … Wells Fargo has already admitted to opening the fake accounts, which, in some cases, damaged customers’ credit reports and resulted in unearned fees. Countless victims of the scam accounts have come together to file lawsuits against the company, legal actions Wells Fargo’s tough legal team is trying to have squashed. Just as the legal fight was about to kick off, Congress got involved. U.S. Sen. Sherrod Brown and Rep. Brad Sherman introduced legislation that would block Wells Fargo from trying to kill the class action lawsuits. Wells Fargo is arguing that the fine print in their customer agreements don’t allow customers to sue the company. They must go through forced arbitration, closed-door meetings, not open court. Sen. Brown wasn’t buying that argument, saying in a statement: “We need to give customers back their ability to seek justice in court so they can be made whole again…”
Rep. Sherman agreed, making the obvious case in support of the aggrieved customers, “They never authorized the opening of phony credit card or checking account(s).” And that’s the core of the complaint. How can customers be held accountable for the fine print of accounts they didn’t actually sign up for? The legislation hasn’t been passed yet, but the stated purpose is to make sure the customers have their day in court and to see Wells Fargo pay the piper for their illegal actions. Wells Fargo, meanwhile, claims they are working very hard to make this right. Between paying back customers for fees they should have never incurred and contacting customers to offer a mea culpa, the company says they are taking all the necessary action to make this right. The customers, of course, hardly agree with that assessment. A bigger issue for Wells Fargo, though, is what the general public thinks about the issue. How bad of a public relations crisis is this for WF, and what will it cost them in brand trust and customer goodwill? The jury is out on that one … even as the issue is on the verge of heading to court. David Milberg is a credit analyst in NYC.