Impacts of Wells Fargo Scandal

Yesterday, news came out that Wells Fargo Bank would have to pay $185 million in fines in addition to the $5 million they had to pay to their customers for accounts that were set up without their approval. Essentially, customers were being charged fees for accounts they had not set up on their own. Patrick Rucker and Dan Freed from the Huffington Post note that, “In a complaint filed in May 2015, California prosecutors alleged that Wells Fargo pushed customers into costly financial products that they did not need or even request.” $100 million of the fines went to the Consumer Financial Protection Bureau (CFPB), which is the largest fine ever paid to the CFPB. The bank opened almost 2 million accounts without the authorization. They fired 5,300 employees (over a five year period) over the scandal, however, the company has 100,000 employees overall.

The most terrifying takeaway away from this scandal is that the banks will still have incentive to do this since the economy is at a standstill. Because they want to show that they are still growing (for their shareholders, as seen in the CNN article linked) without the economy growing they will go to further lengths to keep their banks growing. This will lead to a scandal like this and the possibility for everyone involved to be hurt. Now you would hope that the penalties give them incentive into not doing this again, but there could be other ways they try to keep their growth.

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