Wells Fargo & Co. was slapped with a $65 million fine Monday for illegal ‘cross-selling’ practices, which were at the center of the fake credit card scandal that saw the bank’s employees secretly opening millions of unauthorized accounts for their customers in order to meet aggressive sales targets.
This illegal banking strategy cost Wells Fargo, which is famous for its culture of cross-selling products to customers, more than $250 million in fines over the last two years. US authorities said that employees at the world’s most valuable bank, which serves around 40 million retail customers, had been motivated to open the accounts by compensation policies that rewarded them for drumming up new business.
Cross-selling is the practice of selling existing customers multiple products such as mortgages, credit cards and auto loans. The idea is that having a greater share of a customer’s wallet means that it will be tougher for them to leave the bank. In other words, rather than spending resources to attract new clients, sell existing customers on their bank’s new products.
5,300 workers lost their jobs
“The misconduct at Wells Fargo was widespread across the bank and at every level of management – impacting both customers and investors who were misled,” New York Attorney General Barbara Underwood said in a statement.
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The settlement between with San Francisco-based banking giant will cover customers claiming that its employees opened roughly two million bank accounts and applied for 565,000 credit cards without customers’ knowledge or consent. In some cases, bank employees created fake email addresses to sign up customers for online banking services, accumulating late fees on accounts they never even knew they had.
The scandal has roiled the third-largest US lender by assets, leading to the resignation of its former Chief Executive Officer John Stumpf, who decided to leave the bank in 2016.
The firm said that it conducted a comprehensive review of its sales practices five years ago and had taken “disciplinary actions, including terminations of managers and team members who acted counter to our values”.
About 5,300 Wells Fargo workers, representing roughly 1% of the total workforce, have lost their jobs over their involvement with the case.