Poor Wells Fargo. Every time it tries to regain its momentum, some stupid regulator or government official reaches out a leg and trips it, leaving yet more mud on its face. “Why won’t you give us a break?” Simple answer from the other side, “Because you refuse to give customers a break.”
Here’s WF’s “summer scorecard.”
June: “Lawsuit Accuses Wells Fargo Of Steering Blacks To Subprime Mortgages”
(from the NY Times) “As she describes it, Beth Jacobson and her fellow loan officers at Wells Fargo Bank “rode the stagecoach from hell” for a decade, systematically singling out blacks in Baltimore and suburban Maryland for high-interest subprime mortgages.” Now, the City of Baltimore is dragging WF into court. WF has already attributed what happened to a rogue operation, despite piles of evidence saying otherwise.
But you have to read the whole story to believe it, so here’s the full description:
July: “Mortgage Modifications Moving at Snail’s Pace”
(from MSNBC) “Bank of America and Wells Fargo got low marks in the first monthly report card on the Obama administration’s plan to stem the foreclosure crisis. Both Bank of America Corp. and Wells Fargo & Co. — which have received billions in federal bailout money — were below average. BofA, which did not immediately comment, modified 4 percent of eligible loans, and Wells Fargo 6 percent.” The average was 9%.
After sticking it to customers on the front end, WF sticks it to them again on the back end.
August: “The state of Illinois is suing one of the nation’s largest mortgage lenders for allegedly discriminating against black and Latino homeowners”
(from the AP) “Attorney General Lisa Madigan filed the lawsuit against Wells Fargo Friday in Cook County Circuit Court. The suit alleges that Wells Fargo sold the minorities high-cost subprime mortgage loans while white borrowers with similar incomes received lower-cost loans. Madigan says in a release that the practice helped transform black and Latino neighborhoods into ‘ground zero’ for subprime lending.”
Think the poor victims are getting any mortgage relief? And guess who’s already at the front of the line protesting new lending regulations that would help ensure we don’t go through this again?
Glad we ditched WF a few years ago so we don’t have to do it now.
Dick
Putting Wells Fargo’s US legal system to one side, your post raises some interesting rhetorical questions.
1. Should banks treat different customers differently, even if on the surface they appear to be equally credit worthy (or unworthy)?
2. Were customers able to understand their payment obligations when they signed? If they weren’t, why did they sign and if they were, why should they be protected fom their own folly?
3. Should banks be trying to make as much money from their customers as their customers can bear? They are for profit businesses after all.
UK banks now have to handle customers within the provisions of Treating Customers Fairly legislation. I wonder if such legislation will come to the USA.
Graham Hill
Customer-centric Innovator
Follow me on Twitter
Interested in Customer Driven Innovation? Join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.
Dick Lee: Graham – good questions. Some thoughts:
1. Should banks treat different customers differently, even if on the surface they appear to be equally credit worthy (or unworthy)?
Strictly illegal in the U.S. These suits have the potential to produce very sizable civil fines. Plus, revealtion to the mass public of WF’s behavior could undernine its franchise with minority customers from all groups. From a business perspective, WF is playing with fire.
2. Were customers able to understand their payment obligations when they signed? If they weren’t, why did they sign and if they were, why should they be protected fom their own folly?
Lenders have created lengthy loan documents that are virtually unreadable by even well-educated customers. A provision in the proposed new financial reform legislation would require extreme document simplification. Banks are fighting the new regs tooth and nail but are unlikely to prevail, largely because voting to protect the hugely unpopular banks could be tatamount to voting yourself out of office.
3. Should banks be trying to make as much money from their customers as their customers can bear? They are for profit businesses after all.
You could make that case for the short term. However, consumer abuse has attatched such a stigma on large banks that customer loyalty is all but gone. Inertia and “they’re all crooks” are the main factors keeping customer churn from reaching epic propostions, but churn is severe enough that the term “promiscuous customers” has come into broad use in this space. Continued emphasis on generating short-term profits will only dial up the migration to credit unions and local/community banks
Thanks for taking this down deeper a notch.
Niall Ferguson commented on this matter in his book The Ascent of Money, which I am reading now. (see page 266)
“Indeed I found myself wondering as I drove around Detroit if subprime was in fact a new financial euphemism for black. This was no idle supposition. According to a study by the Massachusetts Affordable Housing Alliance, 55 percent of black and Latino borrowers in metropolitan Boston who had obtained loans for single-family homes in 2005 had been given subprime mortgages, compared with just 13 percent of white borrowers. More than three quarters of black and Latino borrowers from Washington Mutual were classed as subprime, compared with just 17 percent of white borrowers. According to the Department of Housing and Urban Development, minority ownership increased by 3.1 million between 2002 and 2007. Here, surely was the zenith of the property-owning democracy. The new mortgage market seemed to be making the American dream of home ownership a reality for hundreds of thousands of people who had once been excluded from mainstream finance by credit-rating agencies and thinly veiled racial prejudice.”
Dick
What do you think of the ‘Treating Customers Fairly’ legislation as in use in the UK?
Graham Hill
Customer-centric Innovator
Follow me on Twitter
Interested in Customer Driven Innovation? Join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.
Dick Lee: – Graham, unfortunately, I’m unfamiliar with it. Would you share several high points?
Thanks,
Dick