Wells Fargo has long been considered as one of the most stable institutions in the banking industry. However, the federal regulators made a shocking disclosure on Thursday that Wells Fargo employees have been found guilty of fraud. In response, it fired 5,300 of its employees to gain public trust.
The shocking discovery revealed that at least 2 billion unauthorized credit and bank accounts have been created by Wells Fargo employees since 2011. It means that since that time, the bank's clients have no idea that they were paying fees for accounts they didn't know even existed.
Wells Fargo hired and accounting firm to make an accounting on how much money has been extorted through these fake accounts and the result was even more shocking as the number rose to a total of 1.5 million unauthorized accounts.
The procedure involved moving some money from a customer's account into a newly created one without informing the owner of the account. The original account then suddenly has insufficient funds and the customer is charged with overdraft fees.
Aside from these fraudulent deposit accounts, an additional 565,443 unauthorized credit card accounts were also made without the customers' knowledge. These accounts have incurred more than $400,000 in interest charges and other kinds of fees.
These practice has been quite rampant among Wells Fargo employees because they use it to increase their sales and earn more commission from them according to Consumer Financial Protection Bureau director Richard Cordray.
After the discovery, Wells Fargo made a public announcement that it has fired the employees involved in the fiasco.According to Mary Eshet, spokeswoman for Wells Fargo, the process was made during a five-year period.
"We regret and take responsibility for any instances where customers may have received a product that they did not request," the bank informed the public.In addition to that, it will also pay a total of $190 million to their customers whose got affected by the fraud. It will also pay a total of $100 million to the Consumer Financial Protection Bureau.
Cordray also issued a warning to the entire industry saying that what happened should become a lesson for others and that stricter measures should be put into place to prevent more of these from happening in the future.
Despite this scandal, financial analysts are still optimistic saying that it has not affected the industry in a larger scale. Piper Jaffray analyst Kevin Barker said that the situation is only confined within the four walls of Wells Fargo citing the reason that the bank's general atmosphere have also pushed its employees to do such a thing.
