Updates on Banks as Criminal Enterprises: More Wells Fargo Mess

New Orleans   The old adage that “what goes around, comes around” applies nicely to Wells Fargo, long in our experience one of the pariahs of banking and a shameless purveyor of predatory products and lending, long a target of ACORN campaigns.  Recent years have seen their corrupt culture begin to catch up with the San Francisco-based financial institution especially when they were caught creating thousands and thousands of fake accounts in their boiler rooms.  When that shoe fell, others started flying as the bank seems to careen from one scandal to another, and every internal and external report seems to report the impacts as even worse than first revealed.

It is likely far from over.

In a story about the transactional exchanges between banks and universities, where various institutions negotiate semi-exclusive arrangements to have the first and best crack at students, Wells Fargo once again is coming in first when it comes to preying on students as well.  In a recent Wall Street Journal report “twenty-two of the 30 highest average fees” were at schools with Wells Fargo contracts, while 20 of the 30 lowest were with Pennsylvania-based PNC Financial Services by comparison.  Wells in a typically flannel-mouthed response to the reports said that their charges were higher because “some students have ‘more complex banking needs, such as sending wires or purchasing more checks.’”  Who are they kidding?  The markup on check purchases at banks is huge, and how many youngsters use checkbooks rather than cards?  Come on!  They also make beaucoup on wire transfers and remittances, so this doesn’t answer the question either.

There is a sign that the greed and fast dealing of Wells and other banks may have finally gone past the usually rubbery line drawn by the Federal Reserve with one of Janet Yellen’s final announcements as chair.   Responding to Wells as a repeat offender, the Fed limited its ability to grow for the next year until it gets its act totally together, and then in an almost unprecedented move, demanded that 25% of the board be replaced this year.  In a reaction to the decision during the stock market selloff, Wells lost over 9% of its value taking a $29 billion beating on its valuation, pushing it significantly behind its competitors.

Will Wells and its kind finally get the message?  It’s hard to say since we’ve seen nothing but more evidence of predation from them even as their bully-boy practices have been exposed repeatedly.

If patience is running out at the Federal Reserve and on Wall Street, maybe they will finally understand why we chanted in front of their Los Angeles headquarters years ago, “Predatory Lender, Criminal Offender!”


Car Loan from Wells Fargo Equals Ripoff

dinosaur tracks outside in Red Gulch outside Greybull, Wyoming

Manderson, WY  Hey, I know you really want to hear about what Chaco and I are doing in Wyoming. You want to know all about the dinosaur tracks we saw in the Red Gulch. You want to know how we caught two cutthroat trout on Lake Sibley on lures when everyone else was fishing with worms. You want to know how volunteers are keeping the GeoScience Museum going in Greybull and about the Pyramid Rock in the Shell Canyon. Sorry, maybe another day, I was saving some of my fire on Wells Fargo so that we could just look at what happens to the poor suckers who made the mistake of getting a car loan from this banking version of a criminal enterprise.

dinosaur tracks outside in Red Gulch outside Greybull, Wyoming

They had a number of scams going.

The first had to do with forcing people to get collision insurance when they took out a car loan. Wells Fargo had a practice of doing so, and collision coverage is expensive. The bank determined that it had affected at least 800,000 customers according to an analysis they commissioned themselves. Some reports, including in the New York Times, indicated that the number of victims there could also be higher. Not that it wasn’t bad enough!

By larding on the insurance charges they forced at least 274,000 people, ostensibly customers they cared about and not simply marks in a con game, into delinquency, resulting in 25,000 cars being wrongly repossessed. The bank at last report was still debating how much they were going to pay in restitution.

GeoScience Museum in Greybull

I want you to just step back for a minute though. Big numbers sometimes conceal the individual pain inflicted on each individual victim. 274,000 is a lot of people, and could include friends, relatives, and neighbors living near you. They didn’t go out their front door, and yell that they were being ripped off by Wells Fargo. They probably sulked around thinking they had messed up somehow. Meanwhile their credit was crippled, so they could forget about paying lower interest elsewhere, trying to buy a home or maybe even getting an apartment they would like, and certainly buying another car in the future would be a mountain to climb. And, 25,000 of the cars were wrongly repossessed. I’m sorry to be so old school, but I think 25,000 is a big number of people to hurt as well! How many lost their jobs when they lost their transportation or were forced to move. To Wells Fargo, and perhaps to a lot of policy makers, these are just numbers and the penalty will hardly add up to a rounding error on their annual report and balance sheets, but these are real people who were seriously hurt. They weren’t rich people, but people who had to shrug it off and still try to live and raise families.

But, in the relentless quest for extra pennies regardless of the damage to people, it turns out that Wells Fargo also didn’t mind profiteering on some more insurance scams. This ripoff involved GAP or guaranteed asset protection insurance. As the Times reports:

It is not mandatory for car buyers to carry GAP insurance, which typically costs $400 to $600. But car dealers push the insurance, and lenders like it because of the protection it provides. When borrowers pay off the loans early, they are entitled to a refund of some of the GAP insurance premium because the coverage they paid for is no longer needed.

The Federal Reserve and others are now looking at how Wells Fargo closed the GAP to benefit themselves. When someone did their best to pay off their car loan early, Wells just kept the insurance money rather than refunding the balance as nine states require or crediting the unused insurance portion to balance as all fifty states require. Who knows how many were forced into delinquency or repossession by this scam.

Wells Fargo claims that its compliance and oversight slipped up. It’s fair to ask what compliance, is that the guy who closes the door when the bank executives decide in secret that they can steal some money from their customers without them knowing they are doing it?

If you believe that then I have a 20-year old Suburban that I’m glad to sell you for $50,000, and I know just the place that will give you a car loan if you want to add one ripoff to another: Wells Fargo!

Pyramid Rock in Shell Canyon