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Here’s Another Disgraceful Way Wells Fargo Took Advantage Of Its Customers

Here’s Another Disgraceful Way Wells Fargo Took Advantage Of Its Customers

Reprinted with permission from ProPublica.

Wells Fargo, the largest mortgage lender in the country, portrays itself as a stalwart bank that puts customers first. That reputation shattered in September, when it was fined $185 million for illegally opening as many as 2 million deposit and credit-card accounts without customers’ knowledge.

Now four former Wells Fargo employees in the Los Angeles region say the bank had another way of chiseling clients: Improperly charging them to extend their promised interest rate when their mortgage paperwork was delayed. The employees say the delays were usually the bank’s fault but that management forced them to blame the customers.

The new allegations could exacerbate the lingering damage to the bank’s reputation from the fictitious accounts scandal. Last week, Wells Fargo reported declining earnings. In the fourth quarter, new credit card applications tumbled 43 percent from a year earlier, while new checking accounts fell 40 percent.

“I believe the damage done to Wells Fargo mortgage customers in this case is much, much more egregious,” than from the sham accounts, a former Wells Fargo loan officer named Frank Chavez wrote in a November letter to Congress that has not previously been made public. “We are talking about millions of dollars, in just the Los Angeles area alone, which were wrongly paid by borrowers/customers instead of Wells Fargo.” Chavez, a 10-year Wells Fargo veteran, resigned from his job in the Beverly Hills private mortgage group last April. Chavez sent his letter to the Senate banking committee and the House financial services committee in November. He never got a reply.

Three other former employees of Wells Fargo’s residential mortgage business in the Los Angeles area confirmed Chavez’s account. Tom Swanson, the Wells Fargo executive in charge of the region, directed the policy, they say.

In response to ProPublica’s questions, Wells Fargo spokesman Tom Goyda wrote in an email, “We are reviewing these questions about the implementation of our mortgage rate-lock extension fee policies. Our goal is always to work efficiently, correctly and in the best interests of our customers and we will do a thorough evaluation to ensure that’s consistently true of the way we manage our rate-lock extensions.” Through the spokesman, Swanson declined a request for an interview.

Wells Fargo’s practice of shunting interest rate extension fees for which it was at fault onto the customer appears to have been limited to the Los Angeles region. Two of the former employees say other Wells Fargo employees from different regions told them the bank did not charge the extension fees to customers as a matter of routine.

Three of the former employees, who now work for other banks, say their new employers do not engage in such practices.

Here’s how the process works: A loan officer starts a loan application for a client. That entails gathering documents, such as tax returns and bank statements from the customer, as well as getting the title to the property. The loan officer then prepares a credit memo to submit the entire file to the processing department and underwriting department for review. The process should not take more than 60 or 90 days, depending on what kind of loan the customer sought. During this period, the bank allows customers to “lock in” the quoted interest rate on the mortgage, protecting them from rising rates. If the deadline is missed, and rates have gone up, the borrower can extend the initial low rate for a fee, typically about $1,000 to $1,500, depending on the size of the loan.

Wells Fargo’s policy is to pay extension fees when it’s at fault for delays, according to Goyda. Yet in the Los Angeles region, the former employees say, Wells Fargo made customers pay for its failures to meet deadlines. The former employees attributed the delays to the inexperience and low pay of the processing and underwriting staff. In addition, to keep costs down, the bank understaffed the offices, they say.

“The reason we were not closing on time was predominantly lender related,” said a former Wells Fargo employee. When a loan officer asked the bank to pick up the extension fee, “it didn’t make a difference if” the written request “was a one-liner or the next War and Peace,” said the former employee. “The answer was always the same: No. Declined. ‘Borrower paid,’ never ‘Lender paid.’”

Anticipating that it couldn’t close on time, the bank adopted a variety of strategies to shift responsibility to customers. The “most blatant methods of attempting to transfer blame onto customers for past and expected future delays,” Chavez wrote, included having loan processors flag “the file for ‘missing’ customer documentation or information that had already been provided by the borrower.” The customers would have to refile, blowing the deadline.

Sometimes loan officers would ask customers to submit extra documents that Wells Fargo did not need for its initial assessments, burdening them with paperwork to ensure they wouldn’t meet the deadline. On occasion, employees built in a cushion, quoting a higher fee at the beginning. That way, they didn’t have to go back to tell the customer about the extra fee at the end.

One employee says he complained to Swanson’s boss about the situation but upper management referred the problem back to Swanson. The employee’s immediate manager then scolded him.

Swanson told co-workers that he personally took a hit if the bank paid out too many extension fees, two of the former employees recall. “Swanson would be very upfront that his bonus is tied to extension fees,” says one. The other former loan officer says, “During meetings, the branch was told extensions were costing the branch money.”

Swanson, an 18 year veteran of the bank, has faced criticism before that he sought profits at the expense of customers. In 2005, customers in Los Angeles sued Wells Fargo for racial discrimination. They contended that Swanson prohibited loan officers in minority neighborhoods from using a software program that gave them the ability to offer borrowers discounted fees. He allowed loan officers to use the same program in white neighborhoods, where residents paid lower fees as a result. Believing that minority borrowers did not shop around for mortgages, Swanson contended Wells Fargo did not need to offer the discounts in their neighborhoods since the bank faced less competition, according to witness testimony at trial.

In 2011, a Los Angeles Superior Court jury found that Wells Fargo intentionally discriminated on a portion of the loans in question and awarded plaintiffs $3.5 million, a decision that was upheld on appeal. With interest, the payout rose to just under $6 million. “The verdict in the case was not in line with the law and the facts, and there was no evidence that class members paid a higher price than other similarly situated borrowers,” Goyda said. Nevertheless, he added, the bank decided to pay the judgment rather than pursue additional appeals.

“Swanson runs that place,” said Barry Cappello, who co-tried the case against Wells Fargo with his partner Leila Noël. “He is the man. They do what he wants done. Despite the lawsuit and the millions they paid out, the guy is still there.”

Shifting extension fees onto borrowers may amount to just poor customer service, rather than a regulatory violation. Still, if it is widespread and systematic, the bank could be running afoul of banking laws that ban unfair or deceptive practices, regulators say.

For a couple of years around 2011, when Wells Fargo was originating a heavy volume of mortgages, the bank made a decision to pay all the extension fees, spokesman Goyda said. But, around 2014, it reverted back to its traditional policy of paying fees only when it’s at fault.

Chavez says that the problems began in earnest that year and persisted as of the time he left last April. The precise value of the improperly assigned extension fees in the Los Angeles region is unclear. Chavez and another employee estimate they ran into the millions. One of the former employees estimates a quarter of the mortgages at his branch had to be extended. By that measure, if a loan officer did $100 million in loans in a year, those mortgages would rack up about $62,000 in extension fees. The Beverly Hills office alone did around $800 million to $1 billion in underlying mortgages, generating at least half a million dollars in extension fees, the employee estimates. Swanson’s region has 19 branches.

Some customers resented having to pay the extension fees, and took their business elsewhere. After one mortgage application faced a delay, a Wells Fargo assistant vice president in Brentwood named Joshua Oleesky called to tell the customer that he had to pay an interest rate lock extension fee. The customer balked, blaming the bank for missing the deadline. Oleesky “started interrogating me on why Wells Fargo was responsible for the delay,” the customer wrote in a June 29, 2015, letter of complaint to Michael Heid, then president of Wells Fargo Home Lending. (He cc’d John Stumpf, Wells Fargo’s former CEO, who was ousted after the fictitious accounts scandal.) The customer went with another bank for the mortgage. Through the Wells Fargo spokesman, Oleesky declined comment.

According to the customer, Heid didn’t answer the letter.

IMAGE: A Wells Fargo branch is seen in the Chicago suburb of Evanston, Illinois, February 10, 2015. REUTERS/Jim Young

Wells Fargo: Stumpf Was Only The Tip Of Corporate Rot

Wells Fargo: Stumpf Was Only The Tip Of Corporate Rot

Just when you thought that Big Banker greed surely bottomed out with 2008’s Wall Street crash and bailout, along comes Wells Fargo, burrowing even deeper into the ethical slime to reach a previously unimaginable level of corporate depravity.

It’s one thing for these giants of finance to cook the books or defraud investors, but top executives of Wells Fargo have been profiteering for years by literally forcing their employees to rob the bank’s customers. Rather than a culture of service, executives have pushed a high-pressure “sales culture” at least since 2009, demanding that front-line employees meet extreme quotas of selling myriad unnecessary bank products to common depositors who just wanted a simple checking account. Employees were expected to load each customer with at least eight accounts, and employees were monitored constantly on meeting their quotas — fail and they’d be fired.

That’s why the bosses’ sales culture turned employees into a syndicate of bank robbers. The thievery was systemic, and it was not subtle: Half a million customers were secretly issued credit cards they didn’t request; fake email accounts for online services were set up without customers’ knowledge; debit cards were issued and activated without telling customers; depositors’ money was moved from one account to another; signatures were forged — and, of course, Wells Fargo collected fees for all of these bogus transactions, boosting its profits.

This is not a case of a few bankers gone rogue, but of a whole bank gone rogue, rotting from the head down. Some stories of corporate villainy make me throw up my hands in astonishment. But this one is so putrid it makes me literally throw up.

The sorry, still-evolving saga of Wells Fargo systematically stealing from its small depositors is a gag-inducing story of executive-suite greed. Start at the very top, with CEO John Stumpf, who claimed at a recent Senate hearing on the scandal to be shocked and “deeply sorry” that thousands of his employees had been opening bogus accounts in the names of non-English-speaking and elderly customers.

Just when you thought that Big Banker greed surely bottomed out with 2008’s Wall Street crash and bailout, along comes Wells Fargo, burrowing even deeper into the ethical slime to reach a previously unimaginable level of corporate depravity.

It’s one thing for these giants of finance to cook the books or defraud investors, but top executives of Wells Fargo have been profiteering for years by literally forcing their employees to rob the bank’s customers. Rather than a culture of service, executives have pushed a high-pressure “sales culture” at least since 2009, demanding that front-line employees meet extreme quotas of selling myriad unnecessary bank products to common depositors who just wanted a simple checking account. Employees were expected to load each customer with at least eight accounts, and employees were monitored constantly on meeting their quotas — fail and they’d be fired.

That’s why the bosses’ sales culture turned employees into a syndicate of bank robbers. The thievery was systemic, and it was not subtle: Half a million customers were secretly issued credit cards they didn’t request; fake email accounts for online services were set up without customers’ knowledge; debit cards were issued and activated without telling customers; depositors’ money was moved from one account to another; signatures were forged — and, of course, Wells Fargo collected fees for all of these bogus transactions, boosting its profits.

The silver-haired bank chief assured senators that he and other top bosses knew nothing about this mass breach of the bank’s code of ethics, blaming low-level employees and firing 5,300 of them. But John, John, John: First, weren’t you the one squeezing those employees relentlessly to push customers into multiple accounts? Second, how could you possibly not notice a huge crime spree that rampaged throughout your bank’s branches for seven years? Third, what about all those calls that honest employees made to your “ethics hotline” taking place every day? And, fourth, while you now cravenly blame your $12-an-hour employees for this bank-run mugging operation, it turns out you read about it in a 2013 expose by The Los Angeles Times. Why didn’t you stop it then?

Stumpf didn’t act because he was busy stuffing his own pockets with the loot, hauling off more than $100 million in personal pay in the last four years alone. What a deal: Workers are pressured to rob customers, then they get fired, while the boss of the caper grabs a fortune and protects all the higher ups — and he expected to get away with it all by making a non-apology to some senators. [Editor’s note: Stumpf resigned from Wells Fargo, effective immediately, on October 12.]

But the chief is not the only one who should be held accountable at Wells Fargo. Where were its board members, who are empowered and duty-bound to set, monitor, and assure ethnical corporate behavior from the top down? For seven years, this 15-member board of governance sat idle, apparently incurious about their corporation’s flagrant, widespread thievery, even after the report by the LA Times exposed it. Far from investigating and clamping down, the board kept shoving multimillion-dollar bonuses at Stumpf and other top executives. This is a powerhouse board, made up of top executives from other corporations, former government financial officials and big-time academics. And they are extremely well-paid to be diligent, getting up to $400,000 a year to keep Wells Fargo honest.

What’s at work here is the ethical rot that now consumes America’s entire corporate system — a system that steals from the many to further enrich the few, buying off the integrity and vigilance of those who run it. Excuse me, but I have to go throw up now.

To find out more about Jim Hightower, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate webpage at www.creators.com.

IMAGE: Wells Fargo CEO John Stumpf testifies before the House Financial Services Committee on Capitol Hill  in Washington, DC, U.S. September 29, 2016. REUTERS/Gary Cameron

Campaigning In Ohio, Clinton Promises To Hold Wells Fargo Accountable

Campaigning In Ohio, Clinton Promises To Hold Wells Fargo Accountable

 By Amanda Becker| TOLEDO, OHIO

Democratic U.S. presidential candidate Hillary Clinton on Monday vowed to hold Wells Fargo accountable for “egregious corporate behavior” in a scandal over employees’ opening millions of accounts without customers’ knowledge.

“Really shocking isn’t it? One of the nations’ biggest banks bullying thousands of employees into committing fraud against unsuspecting customers,” Clinton told a crowd in Ohio, a crucial battleground in the Nov. 8 presidential election against Republican Donald Trump.

“To understand why this is so important, consider the recent examples we’ve seen of egregious corporate behavior,” she said, citing Wells Fargo.

Ahead of Clinton’s speech, her campaign released a plan to help consumers to sue corporations in court instead of being forced to take disputes to private arbitration. Mandatory arbitration clauses make class action suits difficult or impossible to bring.

Clinton said the Wells Fargo case shed light on how such agreements harm consumers.

“We are not going to let companies like Wells Fargo use these fine print gotchas to escape accountability,” Clinton added.

Consumer advocates say mandatory individual arbitration makes it prohibitively expensive to take legal action and does not set a legal precedent to help other affected individuals.

In Toledo, an area that has lost manufacturing jobs, Clinton said she wanted to “send a clear message to every boardroom and executive suite” that they companies will be held accountable if they “scam” customers, “exploit” employees and “rip off” tax payers.

 Wells Fargo has come under fire for using arbitration clauses after it came to light that the bank’s employees opened as many as 2 million checking, savings and credit card accounts without the customers’ permission in order to meet sales quotas.

Wells Fargo reached a $190 million settlement with federal regulators last month. Its customers have been unable to sue because their contracts said they would arbitrate disputes instead of suing Wells Fargo in court.

Wells Fargo Chief Executive Officer John Stumpf recently said he did not expect the bank to waive the clauses. Democratic lawmakers in Congress, including Senator Elizabeth Warren of Massachusetts, have called on Wells Fargo to allow customers to sue.

“They are forced into a closed-door arbitration process without the important protections you get in a court of law,” Clinton said.

Clinton’s plan calls on Congress to give agencies such as the Federal Trade Commission, Federal Communications Commission and Department of Labor the authority to restrict arbitration clauses in consumer, employment and antitrust agreements.

(Editing by Lisa Von Ahn and Cynthia Osterman)