Audits find no signs of Wells Fargo misconduct in Australia
Wells Fargo Bank’s illegal practice of opening accounts without customers’ knowledge is not rife in Australia, but improvements should be made in the way consumer credit insurance (CCI) is sold.
That’s the view of the Australian Securities & Investments Commission (ASIC) after reviewing the results of audits by eight Australian banks looking at whether the systemic misconduct uncovered at Wells Fargo was occurring in Australia.
The San Francisco bank’s staff had been found to have secretly opened over two million customer accounts since 2011 without their knowledge in order to meet aggressive sales targets. Many customers incurred unnecessary fees and other charges as a result and Wells Fargo was fined US$100 million by US regulators.
ASIC asked the eight banks to audit their sales practices in December 2016 after these practices came to light. The audits focused on three common consumer banking products: basic deposit products, credit cards and CCI from 2014 to 2016.
Overall, the audits reveal that the banks’ controls were adequate to prevent and identify misconduct.
Nonetheless, ASIC says CCI was found to be a standout product for customer complaints and at heightened risk of sale without proper informed customer consent. The audits also identified potential weaknesses in account opening and activation controls, record keeping and change of address processes in relation to CCI.
Following the audit findings, ASIC has announced it will be working with the banking industry and consumer advocates to improve sales practices in relation to CCI. Part of this will involve the introduction of a deferred sales model for CCI sold with credit cards over the phone and in branches.
ASIC adds that all banks involved in the review will be moving away from a primary sales-based reward structure for frontline staff to one that reduces conflicts of interest between staff and customers.
Meanwhile, the fallout from poor practices continue for Wells Fargo in the US.
In July, the US Department of Labor ordered the bank to pay US$575,000 to, and rehire, a whistle-blower who it sacked in September 2011. This person, whose name has not been disclosed, exposed the practice of opening customer accounts without their knowledge.
In April, the Department of Labor also ordered Wells Fargo to reinstall another whistle-blower who raised the lid on bank, mail and wire fraud. This employee also received US$5.4 million to cover back pay, compensatory damages and attorneys' fees.
Earlier this month, the bank announced it will pay the US government US$108 million to settle a lawsuit claiming it charged military veterans hidden fees to refinance their mortgages and hid the fees when applying for federal loan guarantees.
In addition, a recent internal report suggests that more than 800,000 of Wells Fargo's auto loan customers were charged for car insurance they did not need. The bank estimated that this would cost it US$80 million in damages, but several US experts believe the figure will be higher.
Unsurprisingly, the bank’s share price has been languishing this year and its CEO John Stumpf and other top executives have lost their jobs.