Note from the Publisher: It's been all over the press the last few days, but we feel it bears one additional look, from a different perspective, on the massive breach of trust by Wells Fargo, who was just slapped with a record fine for opening 2 milliion unauthorized credit card and deposit accounts. The sheer scale of the fraud that was perpetuated is mind-boggling, and the fact that 5,000+ employees were fired for opening these accounts is unprecedented.
However, look at this from the eyes of a millennial, who already distrusts "the system", and hence is using all kinds of new financial tools and apps from startup robos, payments providers and others from their smartphones. Why should they trust any large bank after they see what this company has done to goose profits at the expense of customers? So - the fintech startups that we write about all day long should THANK Wells for this outrageous breach of trust, as we believe it will drive business their way.
"WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo Bank, N.A. $100 million for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts. Spurred by sales targets and compensation incentives, employees boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges. According to the bank’s own analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers. Wells Fargo will pay full restitution to all victims and a $100 million fine to the CFPB’s Civil Penalty Fund. The bank will also pay an additional $35 million penalty to the Office of the Comptroller of the Currency, and another $50 million to the City and County of Los Angeles.
'Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,' said CFPB Director Richard Cordray. 'Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed. Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.'"
Read Full Announcement at ConsumerFinance.gov