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Wells Fargo agreed to pay $185 million in fines yesterday, after years of opening more than two million fake bank accounts and credit cards in the names of the bank's real customers. The scandal is particularly notable given how widespread the illegal banking practices were -- over several years, Wells Fargo fired more than 5,000 employees for engaging in the fraud, but never ended the practice entirely. Now, some are calling for even more heads to roll.
How can you make sure you don't find yourself in a similar position? While the fallout from the revelation continues to play out, here are some of the initial lessons in-house counsel can learn from the scandal.
The company wants to make sure that its sales people are performing, and it wants to reward those who do the best. But if the Wells Fargo fraud can be traced back to one practice, it's the company's extreme focus on cross-selling, or getting customer's to open as many accounts as possible. If the average Wells Fargo customer had six accounts, the bank wanted them to have eight. And employees reported feeling overwhelming pressure to make those goals, leading them to create false accounts.
If there's one explicit take away, it's that, in the words of Consumer Financial Protection Bureau Director Richard Cordray, "Unchecked incentives can lead to serious consumer harm, and that is what happened here."
Since 2011, Wells Fargo has fired at least 5,300 employees involved in creating fake accounts. That's not a bad apple here or there -- that's a massive amount of employees regularly engaged in illegal behavior, even from a company that employs more than 265,000. Had the company taken decisive action to halt these widespread practices, they could have saved themselves from much of their recent troubles.
Wells Fargo has agreed to pay $185 million in fines and to make full restitution to customers who paid fraudulent fees connected to fake accounts. As part of its settlement with the CFPB, it has agreed to bring in an independent auditor and will make regular compliance reports to the Bureau.
But that's not nearly the end of things. There remains the possibility of future government action by other agencies, and consumer class actions are fairly inevitable.
At least one equity research firm, Rafferty Capital Markets, is calling on Wells' stockholders to sell over the company's "beyond outrageous" behavior. And commentators on CNN are wondering aloud if the company's executives and high ranking employees should be fired, while the Street's Tony Owusu says that the greatest hit the bank might take over the scandal is to its "Golden Boy" reputation.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.