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US bank Wells Fargo may only be the tip of the iceberg of scandals in the sector

Former Wells Fargo CEO John Stumpf. Photo/Getty Images
Barely four years ago, the American multinational financial services company Wells Fargo was named the world’s most valuable bank brand for the second consecutive year. Today, the company’s reputation is in tatters and it is enmeshed in a US$142 million ($211 million) class-action lawsuit alleging acts of misconduct stretching back to at least 2002.

These included pushing its customers into retirement funds managed by Wells Fargo itself; creating bank and credit card accounts in customers’ names without their knowledge; modifying mortgage conditions so that customers ended up paying more than they owed; using what a judge called “deceptive” and complicated contracts to dupe small businesses into paying more than they needed to for credit-card transactions; fining mortgage clients for missing a deadline even though the delays were the company’s fault; selling risky investments it didn’t understand or which were “highly likely to lose value over time”; and forcing car-loan borrowers to buy unnecessary insurance policies. Some who defaulted on payments lost their cars.

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In many of these cases, the practices were driven by employees’ need to reach tough sales targets, the Los Angeles Times reported. The bank had an aggressive programme to “cross-sell” different services to its customers, and chief executive John Stumpf, who has since resigned, encouraged employees to open as many as eight accounts for each customer. More than 5000 workers were fired over the creation of as many as 3.5 million fake accounts.

The Office of the Comptroller of the Currency (OCC), the US’s main bank regulator, has fined Wells Fargo more than US$1 billion. It has also found evidence of irregularities in sales practices at other large and mid-size banks but is so far refusing to name them.

The OCC, which wants to see less financial regulation, is headed by former Los Angeles banker Joseph Otting, one of several big industry names appointed by President Donald Trump.

This article was first published in the July 14, 2018 issue of the New Zealand Listener.