You walk into your bank and the teller says, would you like to open a new checking account? But you already have a checking account. Or, worse, you get sent a new checking account in the mail and you didn’t even ask for it?
Maybe, you are talked in to a savings account, when all you needed was a checking account. Or, you just deposited a large check into your account and the teller gives your name to the investment department.
The next thing you know is that a stranger from the bank is calling you to invest that large deposit into mutual funds.
According to a complaint, prosecutors alleged Wells Fargo put customers into products they did not need, or even ask for. As a result, Wells will pay $185 million in penalties and $5 million returned to customers who were slammed into products they never asked for.
Boiler Room Banking
What’s developed in banks is a sales culture not unlike that seen in the movie Boiler Room. It’s driven from the highest level of senior management and designed to squeeze every last penny of profit out of customers. Those profits create huge bonuses for the banks management.
Privacy laws are supposed to protect customer information, but it’s common practice that the confidential names and records easily flow from one company within the corporation to another.
For example, when a customer brings in large check for deposit, bank tellers are trained and incentivized to give that name to the investment branch. This is not a branch of the bank, it’s an entirely different subsidiary held under the main corporation. It’s like having your employer HR director tell a fellow worker how much money you have in a 401k. It’s confidential, and there are privacy laws to protect this information.
No Real Enforcement
However, in the banks there has been little to no enforcement of these laws for decades. These cross-sell strategies that tellers and bank managers have been trained on have created accounts that are inappropriate. In the case of seniors, it could even be considered elder abuse.
In the case of Wells Fargo, more than 2 million deposit and credit card accounts were opened that may not have been authorized. Aren’t there fees on those accounts? You betcha!
Commercial banks are regulated by the Federal Government. Where’s the follow up?
This is the kind of financial abuse that puts people in jail, right?
By the way, where do the commercial banks get that money to do fractional reserve banking?