Several years ago, Wells Fargo (WF) was caught in a huge violation of the law. Management had set up a program whereby they compensated the boiler room sales people for how many new accounts they opened for customers. Their bosses encouraged them to open these “sham” accounts without the customers’ awareness!
At the time, I could not believe it. How could any management team be so stupid as to put the oldest and most revered big bank name left in the country at risk?
The tellers simply opened up the accounts and attached small fees to them. Management compensated them for each account and naturally the more accounts they opened, the higher their bonuses!
Madoff is in jail forever for bilking all sorts of people with his sham investment accounts, and he his in jail and they threw the key away. But in this case, no one went to jail!
The bank remained under scrutiny for this creative, but bizarre violation of trust. From following our recent blogs, you now that trust is the crucial element of brand loyalty and when the brand violates trust the loyal customers feel betrayed. Of course this is single worst thing a brand can do and it is the quickest way for a brand to decline as a major player in the marketplace.
To say that it is stupid is being kind; it is much worse than that. It is perhaps curious that none of the Wells Fargo executives, managers and sales people were charged, much less went to jail. But we will let the lawyers debate this oddity.
What everyone assumed is that the bank’s operations would be clean as a whistle, because of the punishment applied to Wells Fargo. Clean as a whistle, until last week when we learned that the top brass at WF had cooked up an even larger scheme do defraud their best friends in the world, their customers!
Here is the latest headline from Reuters about the brand:
“Wells Fargo agrees to pay $1 billion to settle customer abuses”
How can this be?
Wells Fargo is still being watched by the feds and still paying for the abuses they foisted on the public two years ago; yet, now we learn that they have cooked up another set of abuses.
According to Reuters, “Wells Fargo & Co will pay $1 billion to settle with U.S. regulators who say the bank wrongly layered insurance on hundreds of thousands of drivers and routinely hit homebuyers with excessive fees.”
The bank is alleged to have imposed additional car insurance coverage on unsuspecting customers whose policies they claimed carried insufficient coverage, leading to hundreds of dollars in extra coverage that they did not need!
Insurance requirements vary by state of course. In many states, consumers must carry collision and other damages and even show proof of coverage in some cases to obtain registration. So it is understandable that Wells Fargo required their customers to take out the type and amount of insurance required in their states, but even required additional insurance and coverage on at least 490,000 consumers who already had the necessary coverage in place!!!
So, what do we have here?
It appears to be a gross example of abuse and betrayal, the last thing that a great brand ever wants to do.
Craven motivation by a few executives to make themselves look better and to grab incentive pay is usually the case in these situations, but sometimes it all comes flowing directly from the top!
I don’t know whether we will ever discover the full truth, but meanwhile the once great brand symbolized by one of the most illustrious, long lasting and beautiful icons in all of American history has splashed more mud on itself than the ruts in the roads out West in the frontier days ever could have done!