Bank regulations that were toughened after the 2008 financial crisis have made it “impossible for bankers to function,” Donald Trump likes to insist.
Tell that to the Wells Fargo & Co. customers who were stuck with nearly $2.5 million in fees after thousands of bank employees, without customers’ knowledge or permission, opened more than 2 million unauthorized checking, savings and credit card accounts.
The epic rip-off – apparently prompted by aggressive sales targets – went on for years before authorities were able to stop it. According to federal regulators, bank employees – told they would lose their jobs if they failed to make gargantuan sales quotas – forged signatures and used fake email addresses to sign up bank customers for extra products without informing them.
Customers often didn’t find out until a check bounced or an odd fee showed up on a statement. When they tried to sue, mandatory arbitration agreements signed with their original accounts prompted judges to dismiss their cases.
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This Wells Fargo scandal wasn’t some freak coincidence in which 5,300 underlings suddenly got greedy.
It wasn’t until 2013 that reporting by Los Angeles Times business writer E. Scott Reckard – now retired, as his newspaper fights the good fight amid yet more ownership struggles – brought the mess to light, prompting a 2015 lawsuit against the bank by the Los Angeles City Attorney’s Office. That suit, in turn, got the attention of the federal Consumer Financial Protection Bureau, which last week fined San Francisco-based Wells Fargo $185 million for its sales practices.
It’s the largest fine issued yet by the CFPB, which banks have been trying to kill since 2010, when it was created as part of those toughened bank regulations. But it’s less than a drop in the bucket compared with Wells Fargo’s $237 billion market capitalization.
Like the lame apology mailed to customers by Wells Fargo CEO John Stumpf (“Last week’s news did not reflect Wells Fargo at its best …”), and Stumpf’s attempt this week to pin blame solely on the 5,300 minions he fired – not the bank, and never the chief executive, mind you – the response isn’t good enough.
This Wells Fargo scandal wasn’t some freak coincidence in which 5,300 underlings suddenly got greedy. “Cross-selling” has been a staple of the banking industry since the recession; this is what happens when people are pressured to cross-sell until they cheat.
It’s why banks handling hundreds of billions of dollars need to be regulated, even more strenuously than they are now. And it’s why the much-maligned “mainstream media” actually matters. Good watchdogs may annoy bankers, but without them, it’s impossible for society to function. No matter what Trump insists.