In the banking industry, competition is steep for which megabank does the most evil. But Wells Fargo may just have the edge over its competitors. Here are 11 things that may justify Wells Fargo being America’s most evil bank.
1. Wells Fargo allegedly pushed black and Hispanic homebuyers into high-cost mortgages
In February of 2018, the California-based bank was accused of pushing Latinx and African American homebuyers into mortgages with less favorable terms than those given to white homebuyers, according to a federal lawsuit filed by the City of Sacramento. The lawsuit said black Wells Fargo homebuyers were 2.8 times more likely to be pushed into a high-cost or high-risk loan than white homebuyers. Latinx homebuyers were reportedly 1.8 times more likely to be subjected to similar unfavorable terms.
The bank was accused of similar behavior in the lead-up to the financial crisis of the late 2000s. According to the New York Times, Wells Fargo mortgage officers privately referred to loans to black homebuyers in Baltimore, Maryland as “ghetto loans,” and the borrowers themselves as “mud people.”
2. Wells Fargo accidentally foreclosed on hundreds of homes due to a computer glitch
In an SEC filing submitted at the end of second quarter of 2018, Wells Fargo admitted that a glitch in its software resulted in hundreds of homeowners having their homes foreclosed on due to mortgage modifications not going through. In the filing, the bank said it had set aside $8 million to compensate the roughly 400 homeowners affected.
“As a result of this error, approximately 625 customers were incorrectly denied a loan modification or were not offered a modification in cases where they would have otherwise qualified,” the filing read. “In approximately 400 of these instances, after the loan modification was denied or the customer was deemed ineligible to be offered a loan modification, a foreclosure was completed.”
3. Bank employees opened millions of fake accounts without customers’ knowledge or consent
As was widely reported in 2017, the bank was caught openly defrauding its customers by opening millions of fake accounts in their names without informing them or obtaining their permission. These accounts were then charged multiple fees, bringing them into negative balances, and racking up millions of dollars in overdraft fees between 2009 and 2015. Employees said they were pressured into opening the fake accounts in order to meet sales quotas. Board chairman Stephen Sanger resigned in the wake of the scandal.
4. Wells Fargo was silent about ongoing federal investigation into fake account scam for 6 months
Even though federal law states that publicly-traded companies have to inform shareholders about non-routine federal investigations, Wells Fargo was apparently not forthcoming with investors for approximately six months while the fake account probe was underway. CNN Money reported that in an SEC 10-Q filing just weeks before the bank announced the federal settlement from its fake account scam, Wells Fargo made no mention of the investigation into its dubious business practices — which may have caused some investors to sell their stock. Three weeks after the settlement was announced, the bank’s stock plunged by 11 percent.
5. Mortgage bankers granted home loans despite knowing income information was false
Traditionally, a bank will only loan a customer money to buy a home if it has verified that the customer’s income information is accurate. However, last week, Wells Fargo was forced to pay $2 billion in fines after federal investigators found mortgage officers granted tens of thousands of home loans to buyers it knew were unqualified. The bank may have been desperate enough for business that it was willing to break the law, given that profits, loans, deposits, and revenue were all down last quarter, according to CNN.
6. Wells Fargo refused activists’ call to stop loans to gun manufacturers
After the mass shooting in Parkland, Florida that resulted in the deaths of 15 students and two teachers, survivors of the shooting demanded that America’s biggest banks stop lending to manufacturers of firearms. As Grit Post previously reported, 17 major banks were, at the time, lending to gun makers.
But while some banks — like JPMorgan Chase — agreed to cut down on loans granted to gun manufacturers, Wells Fargo did not. John Shrewsberry, the company’s Chief Financial Officer, stated the company would not be setting policy in the loans it makes, and said he would leave it up to Congress to come up with a “legislative solution.”
7. Wells Fargo illegally repossessed more than 860 military members’ vehicles
One of the banks’ biggest recent scandals is the illegal seizure of vehicles belonging to members of the U.S. military. In order to repossess a service member’s car, a bank has to obtain a court order. However, Wells Fargo didn’t follow proper procedure, illegally seizing more than 860 service members’ vehicles, according to the Department of Justice. In November of 2017, the bank agreed to compensate each service member $10,000 plus interest, along with whatever equity vehicle owners had in their cars, in addition to repairing their damaged credit.
8. Bankers forced more than 570,000 customers into car insurance plans, causing 20,000 to default
When Wells Fargo customers obtain an auto loan from the bank, they are typically required to provide proof of car insurance. If they don’t have any, the bank will purchase insurance on their behalf. However, in 2017, it was revealed that Wells Fargo bought insurance for more than half a million customers who already had plans of their own and billed them for it. Between 2012 and 2017, approximately 20,000 of those customers were forced into default, and had their cars repossessed as a result. The bank was forced to pay roughly $80 million in restitution, according to CNN.
9. Wells Fargo and other megabanks finance private prisons housing immigrant detainees
Many of the private prison facilities contracting with ICE and the Border Patrol are able to operate thanks to loans from major banks like Wells Fargo. To be fair, other banks are also complicit in funding private prisons, like JPMorgan Chase, and BlackRock. The Center for Popular Democracy — an immigrant rights advocacy group — recently issued a report (PDF link) calling financiers of immigrant detention facilities to task for bankrolling the $5 billion private prison industry, which is dominated by groups like CoreCivic (formerly known as the Corrections Corporation of America) and GEO Group.
10. Wells Fargo mortgage banker outed as a white supremacist who marched in Charlottesville
Earlier this year, Andrew Alexander Murphy Harkins was revealed to be one of the participants in last year’s deadly “Unite the Right” rally in Charlottesville, in which participants changed neo-Nazi slogans like “Jews will not replace us” and “blood and soil” (a reference to the Nazi ideal of racially defined national borders). The Oregonian reported that Harkins had been employed as a home mortgage consultant since 2012, meaning he had likely discriminated against minority homebuyers for years.
11. Bank CEO got 36 percent raise despite multiple scandals
Even though all of these scandals seriously damaged the bank’s reputation, share price, and assets, the bank’s board still gave CEO Tim Sloan a $17.4 million pay package after replacing disgraced former CEO John Stumpf — who oversaw multiple scandals of his own — in 2017. This marks a 36 percent increase in salary from the prior year, according to USA Today. The bulk of Sloan’s pay was in company shares, though he was also paid $2.4 million in base salary. Sloan was paid $12.8 million in 2016.
Logan Espinoza is a freelance contributor specializing in economic issues. He lives in Phoenix, Arizona with his wife and daughter. Contact him at logan DOT espinoza AT yahoo DOT com.