You Don’t Want What Wells Fargo Is Selling. What Should It Do Now?
When Wells Fargo announced its quarterly earnings Friday morning, it was clear that many of its customers were not exactly pleased.
In recent months, the number of new consumer checking accounts had fallen sharply, which is no surprise for a bank that paid a hefty fine in September for opening accounts of all sorts without customers’ permission. Just for good measure, it’s trying to force customers who want to sue to take their disputes to mandatory arbitration. And in its earnings announcement, the company said that measurements of “loyalty” were going to take awhile longer to recover.
To many consumers, Wells Fargo deserves a kind of death penalty: In the same way one might never buy a car again from the cheaters at Volkswagen, it makes little sense to do business with Wells Fargo either.
But an equally good reason to steer clear might be this: Its products and services are mostly middling. The bank rarely is a leader on pricing or rewards. It specializes in ubiquity, with storefronts in all 50 states, and it hopes that we’ll be too lazy to find better deals elsewhere.
The bank claims to be serious about pivoting now (despite having only shuffled the deck chairs in its executive roster, ousting its C.E.O. and elevating his top deputy). So if it wants to stand for something in the minds of consumers other than shoving unwanted products down people’s throats, it might try new approaches — like generosity, clarity, integrity and good citizenship — on for size instead.
Let’s take some of those things, and the bank’s “needs-improvement” offerings, in order:
GENEROSITY Consider Wells Fargo’s basic savings account offerings. Or don’t, lest you be insulted by the interest rates. How does 0.01 percent sound to you? But if you have more than $100,000 that you need to keep safe for a while, the bank will increase that amount tenfold, to a whopping 0.1 percent!
Is there something about being a large financial institution that makes offering a competitive interest rate impossible? Not at all. Household names like Barclays, Discover and Goldman Sachs are happy to give you at least nine times what Wells Fargo does.
The news isn’t much better for credit cards. While American Express, Citi and Chase shower consumers with bonuses and perks, Wells Fargo plods along with cash-back and reward card lineups that do not make the leader board for largess.
Its bankers do this because they can, because they relied for years on a pushy sales culture in the branches where even people who actually said “yes” to the pitches weren’t in a position to compare them in the moment. So the bank didn’t need to have the best products.
That flair for mediocrity may no longer work. Consumer credit card applications declined by a stunning 43 percent in December, 2016, compared with the same month a year earlier. The new Wells Fargo script might go like this: Many of our bankers tried to use you in the worst possible way, so we get why you’re staying away from our cards. But now we’re going to give more things away to all of you who stay loyal to us in our moment of professed contrition.
Here’s one idea for starters: Given its status as a leader in mortgage lending and servicing, the bank ought to double what it pays out on its Home Rebate Signature credit card to people who use the rewards to pay down additional principal on their loans. At least 2 percent cash back is a good benchmark.
CLARITY In its acquisition of Wachovia, Wells Fargo ended up with responsibility for a number of mortgage loans from an outfit called World Savings Bank. Many of those loans put borrowers in situations where their payments did not cover all of their interest costs, and some of those borrowers did not know it.
Victor Amerling, who lives in Tenafly, N.J., is one borrower who had this kind of so-called negative amortization adjustable rate loan. He approached me for help months ago after having no luck getting Wells Fargo to explain to him how — when he explicitly signed up for a biweekly payment program designed to help him and his wife pay off their loan seven years early — he ended up in a situation where that will not happen after all.
His letter from a Wells Fargo executive resolution specialist did not mention the nature of his loan; Mr. Amerling learned of it only after I intervened with the company on his behalf and it disclosed that it had been in negative amortization territory for four years. Instead, the letter said that “we are unable to confirm when your loan will mature by making biweekly payments.” According to the bank, that’s because the interest rate on his loan adjusts so often that it’s impossible to assess, though he could refinance if he wanted more certainty.
In 2000, however, World Savings had given him a piece of paper showing a 2023 payoff date. “This was on an ironically termed ‘Truth in Lending’ statement,” Mr. Amerling said. “They baited me with 23 years, and nobody ever mentioned negative amortization to me. Not my lawyer, not the mortgage broker, not the bank’s lawyer, nobody.”
Wells Fargo did not cause this problem. But why hasn’t Wells Fargo been resetting his payments and those of people like him each year to keep them on track toward their goal of paying off their mortgage early?
Vickee Adams, a spokeswoman, said the bank didn’t know who was in which payment plan or for what reason. Some people are in biweekly plans to pair their mortgage payment up with their biweekly paychecks, for instance.
The bank still holds just under $39 billion in outstanding mortgage loans like Mr. Amerling’s. So a word of warning to anyone there or elsewhere with a mortgage that has an adjustable rate or is even remotely exotic: Double-check with your bank each and every year to make sure you are on track to pay off the loan on your intended schedule.
INTEGRITY Wells Fargo would like to help you invest your life savings, and it has an army of financial professionals standing by to help.
But last year, three academics issued a working paper that ranked brokerage firms by the percentage of their investment professionals who had at least one black mark on their industry disciplinary records. Wells Fargo Advisors Financial Network was the third worst: 15.3 percent of the representatives had, say, been fired from a previous job for cause, settled a consumer dispute in the past or run into a severe financial problem of their own. That’s more than double the industrywide figure, which led the researchers to assume that financial institutions with high percentages were “specializing in misconduct.”
This is not a good look for an institution that has also admitted to signing banking customers up for products that they did not need and never asked for.
Wells Fargo disputes the “misconduct specialization” label, though. “We wholeheartedly disagree with that assertion,” said Helen Bow, a spokeswoman. She added that in 2015, 434 people applied for affiliation with its network. (The advisers fly the Wells Fargo flag and tap into its resources but are not full-time employees.) Just 8.3 percent of them had any sort of disclosure, and the bank accepted only 15 of the 434 total applicants.
That represents real progress. One possibility here: a public declaration that its goal is to get that misconduct figure under, say, 4 percent for its advisers.
GOOD CITIZENSHIP A bank with the size and resources of Wells Fargo should be able to innovate when it wants to, and there are signs that it can. The bank’s yourLoanTracker tool has the potential to help many mortgage applicants know exactly where they are in the process and what paperwork the bank needs, is missing or has lost.
But at a moment when so many Americans are ready to turn their backs on elites and their institutions, this would be the perfect moment for a large financial services firm to say loudly and proudly that it stands for bringing many more struggling people back into the banking system.
In her new book, “The Unbanking of America: How the New Middle Class Survives,” Lisa Servon, who worked in the check-cashing and payday-lending business as part of her research, offers a laundry list of consumer-friendly innovations that any bank could adopt. Wells Fargo executives should turn right to Chapter 8 to see them.
There, she mentions KeyBank, a regional player with a fee-free checking account now known as the “Hassle-Free Account.” Wells Fargo has a similar offering that it could build on called “Opportunity Checking,” but it’s harder to avoid fees with that one.
Nobody wants Wells Fargo to go away. Affluent people want more choices in financial services and better service, and lower-income people urgently need them.
So the bank ought not to run and hide. “That might be their instinct in the wake of their own crisis, to not take any risks and serve the same people in the same way and just try to keep their hands clean,” Ms. Servon said. “But they should take some risk with innovation.”
P.C: https://www.nytimes.com/2017/01/13/your-money/you-dont-want-what-wells-fargo-is-selling-what-should-it-do-now.html
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