Wells Fargo

What happened?

Wells Fargo is currently being investigated by the federal government after an alleged fraud scheme was discovered. Bank regulators found that Wells Fargo had opened 1.5 million fake deposit accounts and 565,000 credit card accounts under existing customers’ names without their permission.

A class-action lawsuit against Wells Fargo in Utah asserts that the bank began opening fake accounts in January 2011. The purpose of these “phantom accounts” was for the bank to charge customers extra fees to boost its sales numbers. According to the lawsuit, the unrealistic sales goals were what pushed employees to begin opening unauthorized accounts. Wells Fargo had an average of six open accounts per customer, and it wanted to increase that number to eight.

Some customers were sent credit or debit cards in the mail that they had not signed up for, while others noticed extra fees being charged to their account. Some even received calls from debt collectors, but the majority of the fake accounts went unnoticed. Employees would create these accounts by moving small amounts of money from existing accounts to the new accounts. In most cases, the accounts were opened and closed before the customer could even notice what was going on.

CNN Money reports that 5,300 employees were fired for involvement in the scam. In addition, the bank will pay $100 million in fines to the Consumer Financial Protection Bureau (CFPB), $35 million to the Office of the Comptroller of the Currency, $50 million to the City and County of Los Angeles and at least $2.6 million in refunds to affected customers. According to the CFPB, this is the largest penalty that the organization has ever imposed.

Wells Fargo CEO John Stumpf apologized for the incident, but has no plans of resigning. The Department of Justice has begun investigating the bank’s activities in relation to the fraud. Wells Fargo is facing accusations of invasion of privacy, fraud, negligence and breach of contract.

What should you do?

If you’re a Wells Fargo customer and think you may have been affected by this scam…

  • Review your account(s) by logging into the Wells Fargo website. Report any discrepancies to your local branch. You can also find this information in a free credit report.
  • File a complaint with the CFPB if you find an issue with your account and cannot resolve it with the bank.
  • You can file a lawsuit against the bank for opening unauthorized accounts in your name. Be aware that arbitration clauses in your customer agreement may thwart your chances of filing a successful lawsuit.