E. Scott Reckard, who did some of the finest work on mortgage boiler rooms during the housing bubble, reports for the Los Angeles Times on how the aggressive sales culture at Wells Fargo is causing problems for customers and employees of the$1.5 trillion banking giant.
Instead of just mortgages, Wells is pushing credit cards, overdraft “protection,” and lines of credit on its customers. Its salespeople are so successful that an average customer has six financial products with Wells—quadruple the industry average.
That’s in part due to a sales culture that Reckard shows to be aggressive at best, and predatory at worst:
The relentless pressure to sell has battered employee morale and led to ethical breaches, customer complaints and labor lawsuits, a Times investigation has found.
To meet quotas, employees have opened unneeded accounts for customers, ordered credit cards without customers’ permission and forged client signatures on paperwork. Some employees begged family members to open ghost accounts.
The Times focuses on Southern California, naturally, and if it had left it at that, this story would be interesting, but much less important—think those local TV “2 On Your Side” consumer watchdog reports. Useful, but usually only in a limited way.
But what makes this story particularly strong is, as always, the reporting. Reckard interviewed three dozen former and current Wells employees from across the country and dug up several lawsuits to document the tactics and the management pressure that leads to them. That shows that this is a national story—not the doings of some rogue branch or regional manager run amok.
The severely weakened LA Times still maintains enough muscle and ambition to make this a national story. But the paper, along with its Tribune Company cousins, is under renewed threat by its private-equity owners.
The reporting yields anecdotes like a homeless woman whom Wells employees signed up for six bank accounts, costing her $39 a month, and customers who were unknowingly signed up for accounts by tellers forging their signatures.
One of the most disturbing parts of the Times‘s reporting shows how Wells is aggressively pushing customers into signing up for overdraft “protection” so it can charge them $35 if their accounts go negative:
The documents, dated from 2011 through October, include a 10-page report tracking sales of overdraft protection at more than 300 Southland branches from Ventura to Victorville; a spreadsheet of daily performance by personal bankers in 21 sales categories; and widely distributed emails urging laggard branches to boost sales and require employees to stay after hours for telemarketing sessions.
An email from a Southern California district manager in 2011 criticized a dozen branches for signing up only 5% to 38% of new checking accounts for overdraft protection — an opt-in service that charges customers $35 for each overdraft the bank covers.
“This has to come up dramatically,” the email said. “We need to make a move toward 80%.”
Overdrafts, recall, were a $39 billion super-high-margin revenue stream for banks before the Federal Reserve issued new regulations to curb the widely abused product, making it an entirely opt-in product, where it had once been impossible to even opt out at some banks. Banks fought that viciously and sent misleading marketing messages to customers to entice them to voluntarily sign up again.
I’d like to read more on how Wells, and banks like it, are getting customers to sign up for a notoriously predatory service like overdraft . If Wells is realistically aiming to get 80 percent of its customers to sign up for something most of them probably shouldn’t want, that’s a big red flag for reporters and regulators like the Consumer Financial Protection Bureau.
(home page photo via Creative Commons license from Prayitno)
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.