Yet Another Wells Fargo Scandal

charmingchimp's picture
Rank: Orangutan | 257

Hey monkeys,

Wells Fargo is starting to get used to apologizing. It was just disclosed that Wells Fargo & Co. has pushed thousands of car buyers into loan defaults and repossessions by charging them for unwanted insurance. Much of this is pointing to major failure in their "internal controls".

An internal review of the bank's auto lending found more than 500,000 clients may have unwittingly paid for protection against vehicle loss or damage while making monthly loan payments, even though many drivers already had their own policies, Wells Fargo said in a statement late Thursday. The firm said it may pay as much as $80 million to affected clients -- with extra money for as many as 20,000 who lost cars, "as an expression of our regret."

Each customer apparently received a WHOLE $140 for the troubles that Wells Fargo caused them.
The bank was run for superior revenue growth and its obvious that the controls around managing these revenues are insufficient. Wells Fargo is still cleaning up last September's scandal which affected over 2 million accounts.

"We take full responsibility for our failure to appropriately manage the CPI program," Codel said in the statement. The bank has publicly promised that it will do better, he said. "Our actions over the past year show we are acting on this commitment."

It seems that Wells Fargo ineffective controls are deep rooted and will be difficult to change.

What do you monkeys think of this fiasco? Will Wells Fargo finally get past its scandals or are more to come? How have your opinions about Wells Fargo changed over the last 2 years?

New Wells Fargo Scandal Seen as Proof Controls Still Lacking

Comments (52)

Aug 1, 2017

Where there's smoke, there's fire.....

If there wasn't more coming, you would have expected WF to throw this into the pile of problems with the phony accounts last year. They wouldn't have gotten more beat up than they did if they announced this at that time.

The best thing about this for WF was having the fortunate timing of having this announced during the week of Scaramucci, so he could take some attention away from them.

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Aug 1, 2017

I have a feeling this won't be the last time we here from Wells Fargo about internal problems

Aug 2, 2017

Things like this get through audit, legal, and compliance when they are actively being subverted from within. There is a good chance of a conscious and ongoing effort we haven't heard of yet.

This should be the part where I tell you monkeys to pay attention to activity in 2015-2016 Subprime Automotive Asset Backed Securities but that would be unrelated news for another day.

Aug 1, 2017

I get credit card and student loan application offers from them all the time and I haven't been a student in years. I would bet this isn't the only issue yet to surface.

Aug 2, 2017

There was just a post on the front page telling people that the IB placement process at WF is terrible. Probably best to avoid this place like the plague.

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Aug 2, 2017

Masters in the art of sandbagging. They're so good, I'm actually more impressed than I am disgusted.

Absolute truths don't exist... celebrated opinions do.

Aug 2, 2017

Hey man, that's a whole $140. So much cash! All joking aside, it's disgusting how these people continue to get away with this horseshit.

Aug 2, 2017

This is what happens when you let sales people run everything. A company I used to work for was run the same way. It's hard to watch, but good luck changing it.

Wells had everyone fooled as the quiet, conservative "family" bank about 10-15 years ago. Great plan, made us all look the other way while they were doing this shit.

"When you stop striving for perfection, you might as well be dead."

Aug 2, 2017
PeteMullersKeyboard:

Wells had everyone fooled as the quiet, conservative "family" bank about 10-15 years ago.

That wasn't 10-15 years ago, that was ONE YEAR AGO.

Aug 2, 2017

I was thinking more about how they mostly stayed on the sidelines during the securitization boom, and sort of put themselves in that position up until last year when all this good old-fashioned-style fraud came out.

"When you stop striving for perfection, you might as well be dead."

Aug 2, 2017

After the second scandal they must be noticing a mass exodus of customers from their services. As a customer you have to be asking yourself now, what else have they been charging me for? What are the things I'm not being made aware of?

I wouldn't be surprised if more customers move on from WF out of sheer paranoia, rather than actually being taken advantage of.

Aug 2, 2017

I have one CC with them and that's it, but I don't want to close it because it's my oldest line of credit and really helps to have that seniority there. Maybe once the other two I have get old enough I'll ditch it. More trouble than it's worth at this point.

"When you stop striving for perfection, you might as well be dead."

Aug 2, 2017

Did ya hear the one about the guy who couldn't afford personalized plates, so he went and changed his name to J3L2404?

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Aug 3, 2017

Yah, that's a good one, Margie.

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Aug 3, 2017

Perfect example of what happens when government gets too big. In this case, the oversized and overpowered regulators are being manipulated by special interests in the private sector to 'get rid of' employees, where it would otherwise be unethical for the employers to do it themselves (according to regulation implemented by the regulators themselves!). A completely ironic and self-sustaining circle-jerk of crony capitalism and corruption. And guess what? This year, like every other election, you get to elect one of two people whose interest is to keep the circle-jerk going.

This is why its idiotic to get mad at anyone who plays along in this game. That's all there's left to do.

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Aug 3, 2017

You do realize that FINRA isn't a government agency, right? It's a self-regulatory organization.

https://en.wikipedia.org/wiki/Financial_Industry_R...

    • 5
Aug 3, 2017

I don't post often, but have been around quite a while. And this is one of the stupidest comments I've ever seen here.

Aug 3, 2017

Why are you and other people acting like this is some apocalyptic event? Customers were barely affected and the fine was barely a dent for Wells.

Aug 3, 2017

what about their credit scores and 5,300 fired employees for WF own unethical practices?

It ain't what you know, it's who you know

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Best Response
Aug 3, 2017

What did the CEO know and when did he know it?

If he knew and he didn't try to stop it, legal action needs to be taken against him. (Not necessarily criminal unless there's a clear case he was a party to fraud, but this is a textbook case of failure to supervise)

And if he didn't know, maybe Wells Fargo is too big. And maybe this is still failure to supervise.

There's no getting around the fact that this is fucked up.

    • 8
Aug 3, 2017
IlliniProgrammer:

What did the CEO know and when did he know it?

If he knew and he didn't try to stop it, legal action needs to be taken against him. (Not necessarily criminal unless there's a clear case he was a party to fraud, but this is a textbook case of failure to supervise)

And if he didn't know, maybe Wells Fargo is too big. And maybe this is still failure to supervise.

There's no getting around the fact that this is fucked up.

Basically this.

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Aug 3, 2017

Without rehashing the other, better thread, the mismanagement of new accounts is being overblown but the part about firing people for whistle-blowing is actually REALLY bad. If true it is a direct violation of federal law.

Aug 3, 2017

I bet that Capital One, Chase, Citi, and BAML are scrambling to figure out if they too messed this exact same thing up...

.

Aug 3, 2017

So here is my take - Wells Fargo runs a great business, with no question. however the damage caused by the scandal is not neglectable, given the fact that the scandal was rooted in the bank's retail unit, which historically generates ~60% of WF's profit. And already we see what's the market's reaction to the scandal. Plus the checking accounts opened with WF in September fell 143k yoy. So can we say the bank is now dead? Probably not, since the bank has a solid business model which was build though time. I would say it is just too early to tell. There is no doubt that one day WF will eventually recover from the scandal and earn back its reputation but it will certainly take time and lots of efforts. As investors, we can definitely hold our positions on the bank like what Buffet said he is doing, but do we really want to lock up our money there with a timeframe that we are not even clear if we know we could have better options?

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Aug 3, 2017

Hmmm...Isnt the regulatory environment across Wallstreet expected to loosen across the board moving forward with Trump now elected?. The pop across the big banks in the days after the election confirms this, no?
Personally I'd prob look to switch banks if I was working for wells for not very long as it may take a few yrs for their rep to improve.

    • 1
Aug 3, 2017

This really isn't a systemic problem to the banking industry and it's a much smaller issue than the events leading up to the 2008 recession.

This is a governance issue where Wells Fargo had an inappropriate incentive plan for its retail banking reps that basically would force them in some situations to inflate sales in order to either a) keep their job or b) get a bigger bonus.

This could be easily fixed with more relaxed sales targets and a revamped incentive plan. And because it's the bank, it's blown completely out proportion so the CEO had to be publicly berated for a little while to calm the public down from going on yet another riot.

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Aug 3, 2017

Aside from the usual "break up the banks" BS that happens every time a bank gets in trouble, there is a real threat of regulatory crackdown coming out of this. Congress basically lynched Stumpf in front of the entire country, and God knows they'd love to use it as an excuse to 1) impose pay controls 2) ban or limit the selling of certain products or 3) pass blanket regs that could impact the Wall Street side of banking as well. Basically, every bank is scrambling to make sure their house is in order, because any more bad publicity right now will be the perfect excuse for a crackdown.

Aug 3, 2017

Buy it - this is hardly a real long term issue for Wells Fargo. It's just politicians lining up to brow beat banks b/c their dumb constituents have been told to hate banks. Buy the dip IMO.

Aug 3, 2017

Yeah I was already long before I wrote this. I just wanted to see what people had to say about it.

Aug 3, 2017

I bought it. The way I see it - they fired a bunch of people who were providing zero value to the company. Only uphill from here... unless Buffet sells

Aug 3, 2017

I would avoid, not buy or sell. Anytime you start dealing with the ire of regulators, you can't calculate the downside. For a bank with a sterling reputation, this is a severe tarnish.

It's still trading well above book value, so it's not like it's a screaming buy, even without this news.

The stock might do fine, but a ten percent drop is nothing to get too excited about even if there is no news. I think that drop is warranted, if not more.

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Aug 3, 2017

tomorrow? they report Q3 Friday I think....

Aug 3, 2017

Yep....looking for any pop/downside from the annoucement.

Also, earnings just out -- both top-line and bottom-line beat. Will be interesting to see what the next few quarters bring.

Aug 3, 2017

Sacrificial lamb. Sucks for him, but it had to be done for the company.

Aug 3, 2017

He should go work for you at Matrix. John Cryan will be next.

Aug 3, 2017

I think he will land on his feet, especially with the help of a golden parachute

Aug 3, 2017

No comment.

Aug 3, 2017
Comment
Aug 3, 2017