The prospect of big bank deregulation in light of the outrageous ongoing criminal activity – because that’s what it is – at Wells Fargo & Co. (NYSE: WFC) makes me cringe.
Last week, the U.S. Federal Reserve, the principal regulator of America’s systemically important financial institutions (SIFIs), proposed the first big bank-friendly rule changes under the Trump administration.
Have you heard about this? No, probably not.
Maybe it was because the changes, which are mostly revised capital and stress test rules, must go through a comment period before they can be adopted, and that’s why the news wasn’t front-page worthy.
Apparently, neither was talk last week that the Consumer Financial Protection Bureau (CFPB) could possibly fine Wells Fargo $1 billion for egregious auto insurance and mortgage lending abuses.
And, no, the mortgage abuses aren’t legacy issues from the financial crisis era; they’re a new rip-off.
Here’s what the news neglected to mention, and what it means for your money.
Back in the Day…
For those of you who have been with me for a while, you may remember back in September 2016 when I wrote about the scandal Wells Fargo had gotten themselves into. Pardon me, the criminal activity they were engaged in.
If you’re new, here’s the quick fix on what happened…
Customers of WFC were subjected to identify theft, forgery, and fraud. Some 3.5 million of them whose names, Social Security numbers, and emails were used to open deposit and credit accounts without their knowledge were paid back false fees they were charged – totaling $5 million.
What sickens me is the extent of criminal activity employed, bearing on a staggering 3.5 million customers, to rake in a paltry $5 million of fees. Granted, the fees would have kept coming if the scheme hadn’t been discovered.
As far as audacity and criminality, how insane are the minds who believed fleecing 3.5 million customers would be justified by some piddling fee income and not be discovered?
That’s Just the Tip of the Iceberg
The “get out of jail card” Wells got from the CFPB for those crimes wasn’t exactly a free pass. For their criminal activity, Wells paid a $142 million fine – the largest in the short history of the CFPB. Of course, no one went to jail.
However, it turns out that the criminal activity was only the tip of an iceberg; I say “an iceberg” because there may be others floating under the surface.
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The latest activity uncovered, which the CFPB is presumably considering a $1 billion fine for, is a lot more of the same low-life, petty criminal activity you’d expect from two-bit, flimflam financial crooks.
One scheme involved layering expensive liability coverage onto customers who had taken out auto loans with Wells. Since auto loan customers are supposed to carry insurance that covers the loan guarantor, Wells figured if the customer didn’t have insurance, it could “force-place” insurance onto them – and add the cost to their monthly bills.
It doesn’t matter that other banks like JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corp. (NYSE: BAC), and The PNC Financial Services Group Inc. (NYSE: PNC) don’t force-place insurance on their auto loan customers.
What matters is Wells did, and they did it legally. What wasn’t legal, but didn’t stop them, was to force-place insurance on people who already had insurance in place.
Of course, commissions were paid on the insurance written – sorry, I mean force-fed. Between 570,000 and 800,000 customers were subject to that scheme, based on different sources.
The number of customers screwed over by Wells Fargo is getting pretty high, and we still haven’t stopped tallying.
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About the Author
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Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets – right from his coveted Bankruptcy Almanac – and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street’s high-stakes game is really played.
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