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Wells Fargo Hit With $185 Million Fine For Widespread Consumer Banking Fraud

By George C. Miller , Esq. of Shustak Reynolds & Partners, P.C. posted on Friday, September 9, 2016.

A joint investigation and prosecution by the Los Angeles City Attorney, the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of Currency (OCC) has revealed that more than 5,000 Wells Fargo employees were fired for pushing unnecessary financial products and services on customers and, in some cases, opening up new accounts without their knowledge or consent. In a 2015 Complaint, regulators alleged Wells Fargo opened more than 2 million consumer deposit and credit card accounts without customer authorization. Wells Fargo recently agreed to settle the charges and will pay a whopping $185 million fine. Of that amount, a record $100 million will be paid to the CFPB, while just $5 million will be returned to defrauded customers.

Aggressive “cross-selling” of financial products to consumers is not unusual. Bank employees are often trained to refer higher-balance holding bank clients to in-house financial advisors and mortgage officers. Those employees, in turn, typically receive bonuses based on the number and quality of those referrals. Wells Fargo was among the most successful at cross-referring its clients, who held an average of 6 Wells Fargo “products” per household (e.g., bank accounts, credit cards, auto loans, mortgages, investment accounts etc.). Regulators alleged Wells Fargo instructed its employees to “do whatever it takes” to reach new sales quotas the bank set to reach its goal of having customers hold at least 8 “products” per household. While Wells Fargo initially denied the allegations and claimed its culture was “focused on the best interests of its customers,” the recent settlement—and the mass firing of more than 5,000 employees over the past 5 years—lends serious credibility to the regulators’ allegations and suggests the bank’s alleged misconduct was widespread. 

Shustak Reynolds & Partners, P.C.’s San Diego FINRA and SEC attorneys have extensive experience representing high-net-worth investors, registered representatives and investment advisors in a variety of securities-industry matters, including FINRA and SEC inquiries and enforcement proceedings.  Contact us today for a confidential consultation.  

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