Wells Fargo, From Trust To Lies

My Ethical Selection/Dilemma

     My choice of Ethical Dilemma which has happened recently and is still being talked about in the news is the Wells Fargo Fake Accounts Scandal. The repercussions and effects of this scandal are still going on and many people have lost their jobs and careers as a result of this scandal. So what is the Fake Account Scandal?.

Between May 2011 and July 2015, more than 1.5 million bank accounts, credit cards,  and sometimes both were opened or applied for without customers’ knowledge or permission. This means the customer had no knowledge that they had applied for a new credit card or opened a new account with the bank. The employees were the ones who were opening the new accounts and credit card applications on behalf of the customers. This was all revealed when the Consumer Financial Protection Bureau (CFPB), the Los Angeles City Attorney and the Office of the Comptroller of the Currency (OCC) were suspicious that some unethical practices were being done behind closed doors at the bank. They discovered that their doubts were indeed correct and fined the bank $185 million on September 8 of 2016. The result of the scandal was atrocious. It resulted in the fine of $185 million and the termination of about 5,300 employees, and counting. The bank, Wells Fargo conducted their own investigation amongst their employees and ranks. The investigation led to the findings that hundreds of thousands of unauthorized deposit accounts along with tens of thousands of credit cards had been opened or applied for at Wells Fargo on behalf of customers without their consent, knowledge or demand for it over a five-year period. Resulting of a total of more than 1.5 million unauthorized accounts.

In layman terms, here is what the employees at the time were doing, they were creating extra accounts and they were funding these “extra accounts” from already existing customer accounts. One aspect of measuring sales at Wells Fargo is by monitoring how many accounts and credit cards an employee has opened and applied for respectively. More accounts and credit cards means more sales, ultimately leading to more business and money. The employees have no option but to make sure they reach their target or Wells Fargo will fire them and get someone else to take their position and will meet their target. It is also important to take note that if employees meet their sales target and go above it, they get rewarded handsomely in the form of bonuses and “gifts”. The problem arose when employees realized that the targets given and assigned to them by the bank were very hard, tedious, and difficult to accomplish. However, by opening multiple accounts and applying for credit cards without the customers’ consent and knowledge, would them to meet their hard sales goals and they would be rewarded by hefty financial rewards under the bank’s incentive-compensation program. An example to make everything easy and understandable, suppose you go to Wells Fargo with 10,000 USD and tell them to open a deposit account and put all the money there. You give them 10,000 USD. Now you as a customer, expect them to do just that, you expect them to take the 10,000 USD and put it in one account, just like you told them to do so. However, this is not what they did. Instead, they took the money and spread it over four accounts, each account getting 2,500 USD out of you 10,000 USD. This way, more accounts are made with your 10,000 USD. Thus, Sales targets are satisfied and guess who is going to get a big fat bonus check in their mail at the end of the month?. That’s right, the employee who took your 10,000 USD. It is extremely important to understand here, that the employees did this for a reason. Well multiple reasons but one of the main reasons is because the sales targets and company goals were very difficult to achieve. If the employee does not reach their target, the bank would fire the employee and replace them with someone who can achieve the target given to them. Therefore, the main reason why employees did this was to keep their jobs. Some would say the targets would be next to impossible. The case went on and on for years, about 5 years to be exact, and this was happening right underneath upper management. With upper management either encouraging the acts of the employees and going with the “flow” or other employees considered to be part of upper management simply not knowing about it. Employees were even going to the extent of creating fake email addresses not belonging to consumers to enroll them in online-banking services without their knowledge or consent. Albeit, the employees did make big, big money as a result but they eventually ended up being fired, sued, and losing a lot of that same money plus more. From 1.5 million accounts, some 85,000 accounts generated fees for the bank worth about $2 million.

What is happening now as a result?. Well the repercussions and consequences of this scandal are still going on as we speak, or read, and people are losing money, their careers and reputation as well. Some former employees who were once employed by Wells Fargo but are now unemployed as a result of being apart of this scandal, can never get another job again. The bank’s image as a once reputable bank which the customers trusted and gave their loyalty to , has been tarnished. The bank’s management and work ethic is one of the reasons which made famous investor Warren Buffett invest a lot of money in the bank. Simply put, the bank will and is going to have to go through major change in management and employees to make sure that something like this doesn’t happen again. The damage has been done, but can be repaired.

Sources for Part 1 :

http://money.cnn.com/2016/09/08/investing/wells-fargo-created-phony-accounts-bank-fees/

http://www.journalnow.com/business/business_news/local/unattainable-sales-goals-fueled-wells-fargo-accounts-scandal/article_11b61522-1f24-557f-970d-c5466db9b575.html

http://abcnews.go.com/Business/wells-fargo-unauthorized-accounts-crackdown-affects-customers/story?id=41973276