Wells Fargo fake accounts scandal

Eight accounts per household, the industry envy. 3.5 million were opened by no one.

The fifth quadrant, where the thing was never real. The tell is that the story is too clean.

Room: Q-F Fraud
Year: 2016
Impact: 3.5M accounts
Sector: Retail banking
Region: N. America
Category: Economic

Why this room

Wells Fargo is qf because the product being sold to investors, namely industry-leading cross-sell depth, was substantially manufactured rather than earned: accounts were opened, funded and in some cases fee-bearing without customer consent, so the headline metric measured an artefact of the incentive system rather than customer demand. The qf tell is the too-clean story, a cross-sell ratio that rose smoothly and was cited as proof of franchise quality while approximately 5,300 employees were terminated over five years for the practices that produced it. The bank's own restatement of the count from about 2.1 million to about 3.5 million potentially unauthorised accounts is characteristic of qf: the true extent of the unreality is only established after the fact and revises upward.

The record

The CFPB consent order of 8 September 2016 records Wells Fargo's own analysis concluding that employees opened 1,534,280 deposit accounts that may not have been authorized.certain
The same consent order records 565,443 credit-card account applications submitted that may not have been authorized using consumers' information without their knowledge or consent.certain
Wells Fargo terminated approximately 5,300 employees for improper sales practices between 1 January 2011 and 7 March 2016; the Board's own investigation report states the directors first learned this figure from the September 2016 CFPB settlement.certain
Total penalties on 8 September 2016 were $185 million: a $100 million CFPB civil money penalty, $35 million to the OCC and $50 million to the City and County of Los Angeles, plus full customer restitution.certain
On 31 August 2017 an expanded third-party review of more than 165 million retail accounts opened between January 2009 and September 2016 raised the estimate from approximately 2.1 million to approximately 3.5 million potentially unauthorized accounts (2.55 million in the original window plus 981,000 in the extended periods); about 190,000 of those accounts incurred fees.certain

Sources

The book

This entry is one of 111 in the register. The full story, and what it cost the people who lived it, is in Risky Business by Claudia Zeisberger, David Munro and Joanna Reijgersberg-Siew.

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