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Longtime Wells Fargo customer Lily Tran remembers the day in 2010 when her friend, a bank employee, contacted her with a pitch for more accounts. Tran was happy with her checking and savings accounts at Wells, but she agreed to open several more. Her friend, she said, was “relieved.”
When news broke that the bank had opened millions of bogus accounts, Tran’s response was nearly immediate: She closed all of her accounts and ended a 10-year relationship with Wells.
“Wells has screwed over their customers, and that makes me very angry,” said Tran, a Daly City resident. “A lot of people have had their credit ruined by what the bank has done.”
Tran’s reaction is emblematic of the public outrage toward Wells, where employees were under such pressure to meet sales quotas they embarked on a years long practice of secretly opening unauthorized accounts and funding them with customers’ money. The bank’s woes have mounted almost daily since the scheme was disclosed, and experts warn they are far from over.
“This is a violation of trust, and that violation of trust will have a longer-lasting impact than the fine they had to pay,” said Ken Thomas, a Miami-based banking analyst. “It wasn’t just a one-time rogue thing. It went on for years. For that reason, we have only seen the tip of the iceberg of the consequences for Wells Fargo.”
The scandal came to a head on Sept. 8, when San Francisco-based Wells Fargo was hit with $185 million in fines. Since then, the bank has been:
Excoriated in hearings before congressional finance and banking committees, including demands by Sen. Elizabeth Warren, D-Mass., that CEO John Stumpf face a criminal investigation.
Slapped with subpoenas from the U.S. Department of Justice.
Suspended from investment business with the states of California and Illinois, along with the city of Chicago.
Hit with an array of analyst downgrades to its stock rating.
Consumer outrage is growing, with customers considering whether to end their business with Wells Fargo.
Paty Guerrero of Fremont, who runs a small business that uses a Wells account, is one. While she hasn’t decided whether to ditch Wells, she echoes Warren’s call for Stumpf to be held accountable.
“The top people should be fired,” said Guerrero. “It’s an invasion of privacy. This is like identity theft.”
Kevin Pham has become a champion of consumer indignation. A former Wells Fargo teller and customer service representative, Pham created a Facebook page designed to galvanize customer anger and has organized a “close your account” day on Nov. 12
“The movement against Wells Fargo is taking off like wildfire,” said Pham, a Daly City resident. “Consumers don’t think the people in power are listening to them. Millions of people were defrauded and stolen from by a bank they thought they could trust.”
Pham painted a picture of employees under “boiler-room pressure” to hit sales quotas.
“We were like a lion on the hunt, trying to identify the most vulnerable prey,” said Pham, who worked at a San Jose branch from 2008 to 2010. He said he quit Wells because of the sales quotas. “The most attractive targets were college students, the elderly, immigrants or non-English-speaking people.”
Wells Fargo has scrambled to respond to the furor. Stumpf was forced to forfeit $41 million in stock and salary. Carrie Tolstedt, who oversaw the community banking unit responsible for the fraudulent accounts, was stripped of $19 million in stock awards. Tolstedt has left the bank, ahead of her planned retirement, and pressure is mounting for Stumpf to step down.
The company also fired 5,300 workers, including rank-and-file staffers, managers and at least one regional vice president. Wells Fargo has ended sales goals in its retail banking business and said it will send confirmation emails to all customers within one hour of the opening of any deposit account.
“We are very sorry and take full responsibility for the incidents in our retail bank,” said Ruben Pulido, a Wells Fargo spokesman. “We are working hard to rebuild our customers’ trust.”
During the subprime mortgage crisis and ensuing Great Recession, the bank maintained a good public image because it shunned the exotic profit schemes that jolted Bank of America, Citibank and JPMorgan Chase. Wells stuck with deposits, mortgages and business loans, a simple formula that helped it become the nation’s most valuable — and most profitable — bank, even topping its big rival, Chase.
But much of that goodwill has eroded in the wake of the accounts scandal.
San Ramon resident Paul Purdy says his daughter went to a Wells branch to open her first checking account — an experience that left a lasting impression.
“She came out of there with four different accounts,” said Purdy, who eventually resolved the matter. “I wasn’t happy about it.”
The Purdy’s story was indicative of what many customers experienced at Wells, experts said.
“The issue is Wells Fargo’s culture, and that target was to hit sales targets at all costs,” said Michael Yoshikami, president of Walnut Creek-based Destination Wealth Management. “The problem is the bank didn’t install the checks and balances to constrain bad behavior.”
It’s not clear how severe the consumer backlash will be for Wells, which has 70 million customers globally. The bank does not release information on account closures.
The accounts scandal came to light during Wells Fargo’s third quarter, which ended in September. When the third-quarter earnings are released this week, the bank isn’t likely to see much of an impact on its bottom line. During the 12 months that ended in June, Wells earned $20.9 billion in profits. That means the $185 million in fines equated to slightly less than 0.9 percent of the bank’s profits.
Now, the consequences of its push to cross-sell customers with new products could shove Wells to depths that before the recent revelations seemed unimaginable, analysts said. Its good reputation and brand, symbolized by the familiar stagecoach rumbling through the Old West, may be in peril.
“The stagecoach,” Thomas said, “is running on wobbly wheels.”
After visiting a Wells branch to close her accounts, Tran became skeptical that the bank had learned its lesson. She encountered her friend, the woman who had pressured her to open the additional accounts years back. Tran asked her if she was aware of the accounts scandal. The response, Tran said, was nonchalant.
“It seemed like she was just brushing off the news about the bank,” Tran said. “She didn’t seem that concerned. The culture still hasn’t changed there.”