Over the course of a decade, Wells Fargo employees opened more than a million checking and savings accounts and over a half million credit cards for their customers. This might sound like quite an achievement, but the kicker is: they opened these accounts without the customers’ consent.
In 1998, Wells Fargo shifted to a volume-based sales model, with cross-selling as its core strategy to increase growth. The company’s compensation structure was highly focused on cross-selling as a performance metric. A high-pressure “perform or be fired” culture, coupled with unrealistic sales expectations, resulted in employees using several “gaming” tactics to meet their quotas:
- Convincing customers to open accounts they didn’t need
- Forging customer signatures to open unauthorized accounts
- Creating PINs to activate unauthorized debit cards (referred to as “pinning”)
- Changing customers’ contact information to that of Wells Fargo employees to prevent customers from receiving satisfaction surveys or other account information
Although top managers within the company were aware of these unlawful practices as early as 2002, it wasn’t until 2016 when customer complaints began to accumulate and regulators took notice.
According to a Department of Justice February 21, 2020 press release, the investigation into the company’s business practices led to Wells Fargo admitting that “… it collected millions of dollars in fees and interest to which the Company was not entitled, harmed the credit ratings of certain customers, and unlawfully misused customers’ sensitive personal information, including customers’ means of identification.”
In 2020, Wells Fargo agreed to settle the civil lawsuit and pay a $3 billion fine. The Office of the Comptroller of the Currency fined John Stumpf, former chairman and chief executive officer of Wells Fargo, $17.5 million. Other executives were fined smaller amounts. The bank also agreed to change its compensation structure and performance metrics to better align with the best interests of its customers.
While all three components of the fraud triangle certainly played a part, pressure clearly played an exceptionally integral role in cultivating the environment that led to these unsavory practices.
We may only focus on Fraud Week once per year in this way, but our professionals educate, assist and prepare clients throughout the year with their unique fraud concerns.
If you have questions or concerns about fraud in your organization, contact Tom Pratt at [email protected] or Brian Webster at [email protected].
Related Articles
- International Fraud Awareness Week 2022
- Perceived Opportunity: The Insider Threat
- The Rationalization Leg of the Fraud Triangle
About International Fraud Awareness Week
International Fraud Awareness Week, or Fraud Week, was established by the Association of Certified Fraud Examiners (ACFE) in 2000 as a dedicated time to raise awareness about fraud. The week-long campaign encourages business leaders and employees to proactively take steps to minimize the impact of fraud by promoting anti-fraud awareness and education.
Learn more at https://www.fraudweek.com.
About Schneider Downs Business Consulting
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To learn more, visit our dedicated Business Consulting page.
Sources:
- https://corpgov.law.harvard.edu/2019/02/06/the-wells-fargo-cross-selling-scandal-2/
- https://www.justice.gov/opa/pr/wells-fargo-agrees-pay-3-billion-resolve-criminal-and-civil-investigations-sales-practices
- https://www.forbes.com/sites/jackkelly/2020/02/24/wells-fargo-forced-to-pay-3-billion-for-the-banks-fake-account-scandal/
