The Consumer Financial Protection Bureau is fining Wells Fargo $100 million over the banking giant’s longstanding habit of opening unauthorized accounts and credit cards for customers.
Wells Fargo staffers opened more than 1.5 million deposit accounts and nearly 600,000 credit card accounts for customers who’d never asked for them or signed papers authorizing them. The bank will pay another $85 million in penalties to Los Angeles and the federal Office of the Comptroller of the Currency. It must also deliver $2.5 million in direct restitution to the customers it cheated.
The bank has fired roughly 5,300 people over the unauthorized product sales, the CFPB order says.
The people fired don’t fit the cultural image of bankers. These aren’t pinstriped limo-riders who light cigars with hundred dollar bills.
Like most American megabanks, Wells Fargo relies on poorly paid retail banking employees to staff its branches. The bank’s sales incentives and high-pressure work culture left these workers with an ugly choice: do the job correctly and get fired, or lie and maintain a steady income.
“We were constantly told we would end up working for McDonald’s,” a former Wells Fargo branch manager named Rita Murillo told the Los Angeles Times in 2013. “If we did not make the sales quotas… we had to stay for what felt like after-school detention, or report to a call session on Saturdays.”
Thursday’s fines and firings are the endpoint of a scandal that’s been public knowledge for nearly three years. Reports of forged signatures and ghost accounts have been coming out since the Times investigated Wells Fargo, which sells more add-on banking products to customers than any other American retail bank.
The 2013 exposé uncovered a top-to-bottom pressure-cooker culture throughout the firm, where managers reportedly “coached workers on how to inflate sales numbers.” The company’s sales quotas pitted workers’ job security against the financial interests of Wells Fargo clients. In one example, a homeless woman who needed one account to receive Social Security checks instead got talked “into opening six checking and savings accounts with fees totaling $39 a month.”
At the time, the bank defended its business practices by noting that bank tellers only get about 3 percent of their pay from sales incentives. But that factoid conceals more than it clarifies.
Nationwide, bank wages fell by 3.4 percent relative to the cost of living from 2009 to 2014, according to the National Employment Law Project. In its latest report this summer, the group notes that hard-sell sales incentives are widespread in the industry, setting millions more workers and banking customers up for the kind of swindle that Wells Fargo has been caught in.
Bank tellers subsist on wages so low that three in 10 were enrolled in at least one public assistance program for the poor as of 2013. The country’s half-million bank tellers earn a median hourly wage of $12.44, and three out of four make less than $15 an hour.
These are the people ultimately being punished in the Wells Fargo scandal. The corporation itself will easily pay its $185 million in fines and keep on humming. It turns a nearly $6 billion profit every three months, on more than $22 billion in total quarterly revenue.
While the fat-cat types at Wells Fargo’s corporate level will survive and move on from this scandal, the penalties announced Thursday nonetheless speak to a key link in the progressive legacy of the Obama era. In prior years, with no Consumer Financial Protection Bureau cop on the beat, such swindles might never have come to light — and would have been far more lightly punished.
Thursday’s penalty is the largest single fine the CFPB has levied to date. Thousands of victims will get full restitution. The agency has now imposed more than $5 billion in fines since its inception in 2010. It has won well over $11 billion in consumer relief from industry cheaters for more than 27 million individual Americans.