Wells Fargo account fraud scandal

The Wells Fargo account fraud scandal is an ongoing controversy brought about by the creation of millions of fraudulent savings and checking accounts on behalf of Wells Fargo clients without their consent. Various regulatory bodies, including the Consumer Financial Protection Bureau fined the company a combined $185 million dollars as a result of the illegal activity, and the company faced criminal and civil suits as well.

Wells Fargo clients began to notice the fraud after being charged unanticipated fees and receiving unexpected credit or debit cards or lines of credit. Initial reports blamed individual Wells Fargo branch workers and managers for the problem, and sales incentives associated with selling multiple "solutions" or financial products. This blame was later shifted to a top-down pressure from higher-level management to open as many accounts as possible through cross-selling.

The bank took relatively few risks in the years leading up to the 2008 Financial Crisis, which led to an image of stability on Wall Street and in the financial world, which was tarnished by the widespread fraud perpetrated by the company and subsequent coverage. The controversy resulted in the resignation of CEO John Stumpf, and an investigation into the bank led by U.S. Senator Elizabeth Warren.

Cross-selling, the practice underpinning the fraud, is the concept of attempting to sell multiple products to consumers. For instance, a consumer with a checking account might be encouraged to take out a mortgage, or set up credit card or online banking account. Success by retail banks was measured in part by the average number of products held by a customer, and Wells Fargo was long considered the most successful cross-seller. Richard Kovacevich, the once-CEO of Norwest Corporation and, later, Wells Fargo, allegedly invented the strategy while at Norwest.

Wells Fargo's sales culture and cross-selling strategy, and its effect on customers, were documented by the Wall Street Journal as early as 2011. In 2013, a Los Angeles Times investigation revealed intense pressure on bank managers and individual bankers to produce sales against extremely aggressive quotas. In the Los Angeles Times article, CFO Timothy Sloan was quoted stating he was unaware of any "...overbearing sales culture". Sloan would later replace John Stumpf as CEO.

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