The Wells Fargo Debacle Goes Way Beyond One Bank

I rarely talk about my jobs, past or present. I am pretty sure no one cares what I used to do for a living and while I had some casual friends for the most part the memories are pretty unpleasant. Still, as the media coverage of the unethical behavior at Wells Fargo continues unabated I am reminded of my life as a bank manager in the retail banking world that most people are familiar with. I spent about four years working as a bank manager for two banks, the one a massive multi-national bank and one a super-regional bank familiar to people who live where I have and do. The public relations nightmare that is hammering Wells Fargo is a much bigger problem than just malfeasance at one bank.

Every time is read more about this, I think "Yup, that is how it worked". The only thing is, I didn't work for Wells Fargo, instead I managed branches for two other huge banks. The incentive structure at both banks worked a lot of Wells. Bankers, the "personal bankers" rather than the bank managers, the workers who opened most accounts, are heavily incentive driven and they are hounded incessantly for more and more. More checking accounts. More loans. More credit cards. More investment revenue. The pressure was so intense that the really big bank I worked for had a conference call for bank managers only and one of the speakers casually said that the life expectancy of a personal bankers was about 18 months. They bring them in, dangle big rewards in front of them and then ride them into the ground. While the public statements are all about customer service and "doing what is right for the customer", the reality is that the incentive programs for bankers and also for managers often was driving them to do things that hit numbers but were not in the best interest of customers or the bank. Here is an example from the Wall Street Journal:

" In Tucson, Ariz., some bankers met sales goals by using a list of wealthier, existing customers who were preselected for credit cards, according to a banker who was fired last year for what the bank called unethical behavior.

The customers were told in phone calls that Wells Fargo planned to send them a new credit card as a “thank you” for their business. If a customer didn’t want the card, he was told to cut the card when it arrived in the mail, according to the former banker.

She says those customers weren’t told that issuing each new card required a credit check, which can lower a person’s credit score."

Yeah, we were told to do that. My people were supposed to call these customers from lists, rapidly explain that they were getting a new "credit line" for overdraft protection and hang up. As long as the customer didn't actively refuse the card, they got a new one in about a week and the banker got credit for a "sale". The thing is, even if people never used the card or home equity line of credit or checking account, it didn't matter. You still got paid. 

" Former branch manager Rasheeda Kamar says her Wells Fargo office in New Milford, N.J., had a goal of selling about 15 new products or services a day. If the branch didn’t hit the goal, the shortfall would be added to the next day’s goal, she says.

Ms. Kamar says laggards were threatened with termination and sometimes criticized in conference calls. In February 2011, she wrote to Mr. Stumpf in an email: “For the most part funds are moved to new accounts to ‘show’ growth when in actuality there is no net gain to the company’s deposit base.” She says she got no reply."

And that. At one bank, if your branch didn't hit it's sales goal the prior day, and most of us rarely did, we had to come in for an early morning, way before the branch opened, "sales call" to be publicly called out and we had to come up with some ludicrous plan to sell more checking accounts and credit cards that day. This is in a town with less than 6,000 people and a dozen banks, including two branches of the same bank! It would not be unusual for every manager in the district to be on the call and the "plans" never did much to change the results so it basically was a punishment. Hit your numbers or you have to get up super early the next day. It was great when you hit your numbers and got to skip the call so you could be smug for a day. 

I always believed that great customer service would lead to more sales and it often did, not to mention it retained money, but no one cared about that. If you opened 30 checking accounts in a week with $100 each but closed 40 with $1000 each, you got praised for all of the "new" accounts you opened, especially for younger customers who were more likely to overdraw their accounts. Like clockwork you could check your overdraft list on Monday and see lots of younger customers with literally hundreds of dollars in overdraft fees from the weekend. We never reversed those fees even though it was simple to do so because that is a huge source of revenue. Banks used to, and I think this has changed, pay items biggest to smallest so if you had five charges and the money for four of them, they would still run the biggest one first, overdrawing your account and then the next four would also be overdrawn and you would get 5 overdrafts fees instead of 1. Plus they charged extra for each day you were overdrawn meaning people without the money could lose almost an entire paycheck at a low wage job in fees before their next paycheck came in.

I like to think that we didn't do that sort of stuff in my branches but I am pretty sure it was going on. I hated working in retail banking and I am well rid of it. I never felt in any other job that what I was doing was immoral but in retail banking I did. I felt good when we hit our sales goals but it slowly ate away at me. When I quit and went back into retirement plan services, I took a printout of my sales goals and whenever I got irritated about my new job I would open my desk and look at those ridiculous sales goals and it made me feel better.

If you give people an incentive to do the wrong thing, more often than not that is what they will do. If you incentive women to get knocked up and not get married, that is what they will do. If you give guys an incentive to not work because getting a job would mean less take home cash, they will play video games instead. If you give guys in suits an incentive to do the wrong thing and punish them for doing the right thing, guess what most of them will do? People who refuse will get fired and people who do what they are told to will get promoted and showered with praise and money.

Whoever you are, you need to check and see what is really going on with your financial picture. Do you have bank accounts you don't use? Credit cards that you don't remember getting, especially the ones from stores? Are you paying a ton of money in fees for "expert investment advice" from someone you never hear from? Check your credit report, look at your bank statement. Make sure you know where any fees are going and what you get for them. Don't expect people with little or no incentive to do so to watch your back. Most of all, don't think "I don't bank at Wells Fargo so this hasn't happened to me." You might be surprised.