Unless you were living under a rock yesterday, you likely heard the news that Banking giant Wells Fargo has been the recipient of the largest fine in the history of Consumer Financial Protection Bureau. The CFPB issued a $185 Million fine against Wells Fargo after investigations proved that employees were removing money from the accounts of customers without their consent and using those funds to open up credit card accounts the customers didn’t authorize. Customers didn’t realize this had happened until fees began accruing on these unauthorized accounts.
The reasoning behind it appears to be a perverse sales quota system which incentivized employees based on how many accounts they opened. The more accounts you opened, the bigger bonuses you got. Thus, the birth of the fraudulent accounts which netted money for the employees, while violating the trust customers placed in the bank to keep the funds on their deposit accounts safe.
Not long after news of this broke, Wells Fargo announced that 5300 employees (or around 1% of it’s workforce) were fired as a result of the scandal. Predictably, it downplayed the size of the scandal and made the public mea culpa that you would expect a business caught red-handed to make. The implications were that this was isolated to only 1% of employees, despite the CFPB arguing that the practice was widespread.
I would argue that 5300 employees all caught doing the same thing at various locations around the company isn’t isolated at all…they aren’t rogue employees. They are a flashing red light of major management problems. It is indisputable that if you have an incentive system that rewards based only on the creation of new accounts, or a quota system for performance evaluation that looks at the creation of new accounts, this kind of dishonest activity is bound to follow.
Clearly, further investigation by Wells Fargo into their oversight and management is warranted. At best, if the managers of these employees didn’t know this was happening, they are inept managers who should be removed from oversight positions since oversight is clearly not something they are doing well. At worst, if the managers were suggesting or actively encouraging this behavior, they should be disciplined as well, up to and including termination.
It shall be interesting to see if there is any further investigation into the root cause of these issues. This was a major scandal, but it was only a symptom of bigger problems at Wells Fargo. Companies often handle this in two ways: ignore it and hope it goes away or face it head on and make the difficult changes required to address these issues. Only time will tell which method Wells Fargo chooses.