wells fargo - the San Francisco based bank, which is considered one of the world's best for consumer banking, is facing trials after another scandal, forcing top executives to fire and reshuffle its staff.
Unethical actions by employees surfaced in 2016
Just last September, Wells Fargo ex- CEO John Strumpf resigned over a scandal that rocked the banking world. Before the scandal, Wells Fargo prided itself on its untarnished reputation, having been one of the only Big Five banks to have come out of the financial crisis without declaring itself bankrupt, or embroiled in controversy over defaulted payments on Mortgage Backed Securities.
In September 2016, over 5000 Wells Fargo employees were found guilty of creating over two million fake bank accounts. Portions of their customers' savings were moved into them, to reach satisfactory levels on their sales targets and prop up their own bonuses as a result. The employees also pocketed the fees the bank earns from opening new accounts. Additionally, half a million new credit cards were issued.
John Strumpf faced the heat at court hearings, where he was unable to provide proper justification, and even lamely feigned ignorance. He, however, could not explain how the malfeasance of more than 5000 employees went unchecked, as he took a beating from the likes of well liked Massachusetts Senator Elizabeth Warren.
However, it seemed like Wells Fargo had put the worst behind them, and were on their way forward after Tim Sloan was appointed new CEO. There were several class action lawsuits, and at the conclusion, Wells Fargo agreed to pay $185 million in a settlement. It has to pay an addition $140 million to customers.
Their skeletons were surely buried, as, by December 2016, they seemed well on their way, with share prices reaching $57 per share.
Present: Auto insurance scandal
Now, they seem to be enmeshed in a new scandal, this time involving the sale of Auto Insurance to their clients.The current scandal seems to be bigger than ever. According to leading publications, 70 senior managers are going to be receiving the pink-slip for malpractice.
Managers at Wells Fargo have been said to have enrolled 800,000 customers in redundant auto insurance (collateral production) when they already possessed sufficient insurance.
To make matters worse, the redundant insurance Wells Fargo made customers purchase was more expensive than the insurance they already owned. It seems some of these customers are still paying for it.
As a result of the fraudulent practice, around 25,000 car owners have lost possession of their cars, thanks to wrongful repossessions. Moreover, 274,000 customers were pushed into delinquency, because they could not afford the monthly payment plus the premium, according to the report obtained by The New York Times.
Franklin Codel, head of consumer lending, is said to have apologized, according to Fortune.com. Again, Wells Fargo finds itself dishing out for malpractice, this time to the tune of $85 million in refunds to wronged customers.
We would have to wait a few days to get the outcome of the lawsuits, to see how much Wells Fargo will be paying in fines this time around.
It remains to be seen what restorative steps Wells Fargo will take to correct the two gaping blunders in its otherwise irreproachable timeline. They would have to put this behind them "bigly," as the President of the country says, and regain the trust of its customers, who may already be moving to the other banks, which just stand to gain from the state of affairs Wells Fargo has put itself in.
