After regulators revealed that Wells Fargo bankers had opened millions of bogus accounts to hit sales goals, scrutiny fell on the incentive model employed by the third-largest lender in the country. In short order, that model got the boot. On Tuesday, the bank announced it would abandon the high-pressure quotas that nudged at least 5,300 employees to bilk their customers over the last five years.
The decision marks an abrupt about-face for the bank, which had staked its post-crisis growth in part on its ability to hawk its products to existing depositors, otherwise known as cross-selling, with help from aggressive sales goals.
But if we’ve learned anything from banking scandals over the last decade, bad financial behavior is usually contagious. Wells Fargo isn’t the only big bank that uses high-octane sales goals to fire up its employees. Nor is it the only major lender that has aimed to boost revenue through cross-selling, which is a standard practice in the industry. In particular, Bank of America follows some of the same practices as Wells Fargo, including both its strict use of quotas and efforts at cross-selling.
Indeed, Bank of America has been singled out for criticism in this exact space. When groups of aggrieved tellers and labor-backed activists stormed bank branches last year over what they characterized as abusive sales goals, Bank of America and Wells Fargo were the chief targets.
Getting customers into extra products is enough of a priority at BofA that Thomas Montag, the bank’s second-in-command, appeared at a company function last year wearing a matching hat-and-T-shirt combination with the phrase “Cross Sell” emblazoned across them, as the Wall Street Journal noted around that time.
The government financial watchdog that brought the $150 million fine against Wells Fargo has been pressured to extend their investigation to other institutions. On Monday, two senators sent a letter to the Consumer Financial Protection Bureau asking the agency whether it has probed other banks.
According to the CFPB’s own data, there’s evidence of wrongdoing elsewhere, at least if consumer complaints are to be believed. As MarketWatch pointed out, a database of grievances compiled by the agency shows Bank of America in the lead with 4,901 complaints against the company in the category of “account opening, closing or management.” That sum edged out Wells Fargo - at 4,450 - and JPMorgan, which racked up 3,169 complaints.
Employees have voiced their own concerns. As part of the study that precipitated the protests at Bank of America last year, one banker said he’d quit after developing an ulcer and vomiting blood due to the stress of the job. Another discussed the impacts of opening credit card accounts that customers didn’t ask for: “There’s a lot of confusion it can cause; people can get all sorts of fees they don’t understand.”
Another employee: “It’s not a financial service position, it’s a sales position. And that means it’s not about the customer.” On job-hunting sites like Indeed, it’s not hard to find posters who identify themselves as Bank of America employees lamenting the pressures of sales quotas.
Of course, this is all anecdotal and circumstantial. A crucial difference between Wells Fargo and its peers is that the San Francisco-based lender highlighted its cross-selling statistics on annual reports and boasted about the data to analysts. Bank of America and other major national banks don’t separate out data points like products-per-customer. And their emphasis on cross-selling doesn’t quite match Wells Fargo for enthusiasm (hats and T-shirts notwithstanding).
But that’s part of the problem with rooting out bad behavior in sprawling financial institutions. Wells Fargo fired more than 5,000 employees for inappropriate account activity over the course of five years without any larger pattern being detected by regulators. Indeed, it took a Los Angeles Times investigation -- not a government probe -- to even get the ball rolling.
It’s impossible to tell at this juncture whether there’s any fire under all this smoke. But we can be sure that Brian Moynihan is feeling hot under the collar...or at least hotter.