The little red stagecoach has had a smooth enough ride so far this year. Merely drawing breath was enough for investors to reward Wells Fargo when it reported earnings earlier this month. And a new pay scheme promised to help out with that whole lying-cheating-and-stealing thing that the bank had going on. But if you thought 2017 would bring an end to the interminable bludgeoning of the nearly unidentifiable mass of quivering pulp that is Wells Fargo, we've got some bad news for you. The hits keep coming, even if they aren't the same body blows as before.
As Pro Publica's Jesse Eisinger reports, the bank now stands accused of wrongly pushing millions of dollars in mortgage-related fees onto bank customers. In a previously unreleased letter to Congress, former employee Frank Chavez explained how Los Angeles branches of Wells Fargo misled customers into paying interest-rate extension costs that should have been borne by the bank.
“I believe the damage done to Wells Fargo mortgage customers in this case is much, much more egregious,” Frank Chavez, the employee, wrote. “We are talking about millions of dollars, in just the Los Angeles area alone, which were wrongly paid by borrowers/customers instead of Wells Fargo.”
The allegations, backed up by three other employees, go like this. Borrowers apply for a mortgage at an interest rate quoted by the bank. The bank's loan officer then collects a bunch of documents to file with the processing department. There's a deadline for this process, and if things aren't wrapped up by then – and interest rates rise – the customer has to pay a fee to extend the initial, lower rate. That is, unless the bank is at fault.
In that case, Wells Fargo promises to pay the fee. But according to the whistleblowers, regional executive Tom Swanson pressured bankers to fudge who was at fault and push the fees onto borrowers. It will surprise none of our readers to know that extension fees allegedly affected this exec's pay. From Pro Publica:
Swanson told co-workers that he personally took a hit if the bank paid out too many extension fees, two of the former employees recall. “Swanson would be very upfront that his bonus is tied to extension fees,” says one. The other former loan officer says, “During meetings, the branch was told extensions were costing the branch money.”
From all available evidence, the practice was limited to the L.A. area, and hardly rose to the level of previous revelations – i.e., bankers fraudulently opening up millions of customer accounts in order to hit unrealistic targets, then firing the employees who tried to stay on the straight and narrow. It's also worth taking each new Wells Fargo allegation with an increasingly large grain of salt; we're undoubtedly in the kick-em-while-they're-down phase of corporate scandal.
But the allegations comport with pretty much every other Wells Fargo misdeed we've learned in the last year: Pay someone for a result, and you'll get that result, whatever the cost.