Scandal Involving Wells Fargo's Fake Accounts
Wells Fargo is embroiled in a controversy involving the formation of fake savings and checking accounts without the clients' permission. It entailed transferring funds from valid accounts. The Consumer Financial Protection Bureau fined the corporation 185 million dollars for the fraudulent conduct (Koren, James).
Discovery of the Scam
Customers of Wells Fargo became aware of the scam after being paid unexpected fees and issuing unexpected credit and debit cards. The responsibility was initially placed on the department managers and staff, but it was quickly moved to top-down pressure from high-level management. Workers were encouraged to order credit cards for those clients who were yet to be approved without their authorization. Employees were supposed to use unapproved client's information when filling out the requests. The process of creating new accounts was made possible by the pinning process, which involved setting the customer's pin as "0000". By this, bankers were able to control the account of the client making it easy to enroll them in programs such as online banking. In September 2016, the number of unauthorized deposit accounts was 1,534,280 while the credit card accounts were 565,433.
Impact on Customers
Furthermore, estimates released in May 2017 showed that the number of fraudulent accounts approximated to 3,500,000. Nearly 85,000 accounts opened incurred fees, which amounted to $2 million. Additionally, the client's credit scores were affected by the fake accounts. The clients could not be able to take any legal action towards the bank because the process of opening an account required customers to enter into a private arbitration with the bank.
Impact on Employees
The scandal also affected the non-management Wells Fargo employees (Koren, James). This is because the employees found it difficult to gain employment in other banks during the scandal. Banks are required to offer documents to departing employees showing their record on unethical conducts. Wells Fargo issued defamatory documents to the employees indicating that they had been involved in the creation of unwanted accounts. The company later released news that it would rehire 1000 employees who had been wrongfully terminated because of the fraud.
Legal Consequences and Compensation
Wells Fargo remains under pressure from the politicians and customers over the issue of fake accounts. The Company is also facing a legal backlash from the borrowers who claim that they were charged fees for the bank to lock in the pledged rates on the new mortgages. However, the company has promised to pay $10.7 million to compensate the clients for opening fake accounts in their names without their authorization (Koren, James). This would include $7 million for refunds and $3.7 million for the complaint process and mediation. Moreover, the firm is also willing to pay $80 million to those affected by the auto insurance misfortune with more money for those who lost their cars.
Accountability and Prosecution
CEO Stumpf should be arrested and prosecuted for criminal charges against the customers. This is because he failed in his duty to govern and control the acts of the employees. Furthermore, the manager encouraged the employees to create fake accounts. Those who did not follow the order were illegally terminated from employment. Employees should also be prosecuted for interfering with the accounts of the clients. It is against the code of ethics to try and access customer's accounts without their consent. In case they are found guilty of creating accounts, they should be forced to compensate the customers. Furthermore, the affected clients should be allowed to testify against CEO Stumpf and the employees.
Work Cited
Koren, James. “It’s Been A Year Since The Wells Fargo Scandal Broke — And New Problems Are Still Surfacing.” Latimes.Com, 2017, http://www.latimes.com/business/la-fi-wells-fargo-one-year-20170908-story.html.
