The reputation of Wells Fargo & Co. sustained a major hit in recent months after it was reported that the bank set up unauthorized accounts in both customer’s and non-customer’s names over the past five years. Despite a public relations blitz in the form of television commercials and full-page ads in newspapers, it appears that the company’s concern is more image-based than making a concerted effort to atone for the mistake.
That’s because the company is seeking to stop a class action lawsuit against the company by asking that each of the 80 cases involved be decided by binding arbitration. That lawsuit was filed one week after Wells Fargo had announced it would pay $185 million to avoid claims from the thousands of customers affected.
The scheme involved setting up as many as two million fake customer accounts, with shifts of money going from a legitimate account into the phony one. That allowed the bank to assess each account additional fees because the original accounts subsequently were subject to overdraft fees or other assessments such as insufficient funds.
In addition, over half a million credit card applications were submitted without the knowledge of customers. That resulted in fees of more than $400,000 because of annual payments and interest charges.
That helped increase employee’s sales figures, resulting in additional bonuses for their alleged work. The method used by these employees included providing phony e-mail addresses and giving each account fictional PIN numbers.
Wells Fargo fired over 5,300 employees that were involved, yet public knowledge of the fraud only became known in October. That news had a direct impact on both new bank accounts and credit card applications. From September to October, new bank accounts decreased by 27 percent and credit card applications dropped by 35 percent.