Wells Fargo Horrific Downfall
A huge bank in the United States headquartered in San Francisco, California is known as Wells Fargo and Company. The founders would be Henry Wells and William Fargo in 1852 which was a decent time ago. Wells Fargo is just like any other bank as they operate the same way giving customers the chance to open checking’s or savings accounts, loans and other financial services. Being one of the largest banks in America that also deals with businesses as well as customers. A study had shown that “One in 10 small businesses does business with Wells Fargo” (Maxfield, John) which is a great percentage of their customers. They give a great deal to their customers as far as the mangers and CEOs, but the employees have their own minds. Nobody knows what goes on behind the scenes at the bank of Wells Fargo until 2016. An incident that happened in 2016 could have broken the Wells Fargo company for good that involved their employees. A few scandals that have been going on for years that none of their customers knew about. They have broken laws that could cost the company everything they have.
This scandal was not only hurting the Wells Fargo company but their customers as well. The main parties involved in this sandal were Wells Fargo and company, former CEO John Stumpf, current CEO Tim Sloan, former head of retail operations Carrie Tolsedt, the employees and customers of Well Fargo. It was released on September 8th, 2016 “Federal regulators reveal Wells Fargo employees secretly created millions of unauthorized bank and credit card accounts without their customers knowing it”( Investors are pushing proposals to rein in Wells Fargo). This concludes that the employees have been going on for a while now making these accounts behind everyone. The employees main focus is the saying “Eight is Great” by John Stumpf which means in order for them to earn commissions and avoid termination they would have to get eight accounts per customer (Comrie, Harley). If employees failed to do what they were told, then managers would yell and threaten them until the sales were reached which lead them to the fake accounts.
A few days after the public found out they have announced Wells Fargo of committing fraud. John Stumpf the CEO at the time testified in front of the US House of Representatives Financial Services Committee on behalf of Wells Fargo. This case was taken to the Financial Services Committee of the House because they oversea anything due to financial services in this case would be fraud. The company was breaking a criminal law and will be faced with a penalty. The Wells Fargo Company was fined for the customer fraud $185 million from the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the City and County of Los Angeles (Wolff-Mann, Ethan). This was the end of Stumpf’s career of being the CEO has he resigns in October 2016. The new CEO to take over his place will be Tim Sloan. With this scandal a couple thousand employees that had been involved were let go. Although the company had suffered very harsh consequences the customers were affected too. Most have their credit scores damaged from opening up all kinds of credit card accounts they did not know about. This is the company’s big fall from being one of the top profitable banks in the United States.
Occurring in the same year as the fake accounts scandal something else has come up involving Well Fargo that violates the law. On September 28th, 2016 the are accused of illegally repossessing 413 service members cars leading them with another $24 million to settle charges (Wattles, Jackie, et al). This case was well handled by The Justice Department after they have violated another federal law. It was first heard from an army guardsman in North Carolina when the bank seized his car then auctioned it off (Wattles, Jackie). Refunds from this will be given by the company and an apology was made concerning what had happened. They are also providing everyone concerned with lost equity and attempting to fix their credit scores.
Over the years till 2017 it had gradually gotten worse. They were sued for ripping off small businesses, more fake accounts had been found and then more service cars were illegally repossessed. The bank admitted to these allegations also making decisions for customers auto insurance. There was an increase in the amount of fake accounts that now reached 3.5 million (Wattles, Jackie, et al). These cases went to trial again with The Justice Department for violating the same federal law. Wells Fargo bank will pay back millions of dollars to all customers involved with the fake accounts scandal and service cars. The Federal Reserve got involved and punishes the bank saying they will not be able to grow until they clean up their act (Wattles, Jackie, et al). With all this happening in two years and many employees getting fired Wells Fargo was living in a company’s disaster.
The results of these scandals lead to serious consequences to the Wells Fargo Company. Many employees were let off during this time with higher position employees being downgraded. No one was said to be arrested which would have been the worst case for the bank. They did have to pay a ton on money in fines and refund all customers that were involved in the scandals. Customers in the future years will remember what happen and may reconsider if they want to still proceed with their bank. Any business should learn from their experience as they are still dealing with these consequences now and will be for the rest of their time in business.
February 2, 2023
February 2, 2023