By Peter Rudegeair
The city of Los Angeles accused Wells Fargo & Co. in a
lawsuit of pressuring employees of its retail bank to commit
fraudulent acts, such as opening customer accounts without their
approval, in order to meet management's sales goals.
Wells Fargo has for years "victimized their customers by using
pernicious and often illegal sales tactics" that resulted in
customers having to pay monthly service fees on accounts they
didn't authorize as well as feeling forced to buy identity-theft
protection services in order to prevent future fraud, the city said
in a complaint filed in state court on Monday.
Wells Fargo has the reputation for being among the most
successful U.S. banks at "cross-selling" their customers into other
products and services the bank offers, such as getting a
checking-account holder to take out a Wells Fargo credit card. The
San Francisco-based bank reported in the first quarter that retail
customers maintained an average of 6.13 products per household,
down slightly from 6.17 last year as a result of the bank selling
its government-guaranteed student-loan business.
According to Los Angeles city attorney Michael Feuer, the bank
accomplished this in part by abusing employees and telling them "to
do whatever it takes" to reach quotas on the number of new accounts
they must open. Managers "constantly hound, berate, demean and
threaten employees to meet these unreachable quotas" and gather to
discuss daily sales for each branch and employee four times a day,
the complaint said.
A Wells Fargo spokesman said in an emailed statement that the
bank will defend itself against the city's allegations. "Wells
Fargo's culture is focused on the best interests of its customers
and creating a supportive, caring and ethical environment for our
team members," the spokesman said.
Although the bank has disciplined and even fired some employees
for "gaming" its quota system, the city said the bank "has done
little, if anything, to terminate these practices, nor to reform
the business model it created that has fostered them." The city
charged that Wells Fargo's behavior violates California's unfair
competition law and is asking the court to assess a $2,500 civil
penalty for each unlawful act.
The complaint also provided a glossary of terms that it said
Wells Fargo employees used to describe unsavory sales tactics, such
as "pinning," or assigning personal identification numbers to
customer debit cards without their authorization in order to open
an online banking account, which counts toward the sales quota. To
conceal this, Wells Fargo employees would enter in false contact
information for the customers, such as an email address of
"noname@wellsfargo.com.<mailto:noname@wellsfargo.com.>"
The allegations were first raised in a series of articles in the
Los Angeles Times in 2013.
This week's complaint isn't the first time Los Angeles has
accused Wells Fargo of harmful consumer practices. In a December
2013 lawsuit, the city said Wells Fargo discriminated against
minorities and overcharged them for mortgages since at least 2004.
That lawsuit is still active, the bank spokesman said.
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