Dive Brief:
- Wells Fargo will begin issuing refunds in 2020 to some checking account customers who were charged a monthly fee because of a bank policy Rep. Katie Porter, D-CA, last month called out as unclear.
- Wells Fargo CEO Charlie Scharf, in a Monday letter to Porter, did not indicate how much the bank expects to pay out. It disclosed in a Securities and Exchange Commission filing in May "the possibility of confusion" among some customers as to which kinds of transactions count toward a benchmark in order to avoid a $10 monthly fee attached to the bank’s Everyday Checking and Opportunity Checking accounts.
- "Our priorities today are clear: Address all regulatory and control issues in the company and serve our customers every day with the highest operational and ethical standards to enable them to succeed financially," Scharf wrote to Porter, according to American Banker. "We feel a great sense of urgency to deliver on these priorities and we will allocate the necessary resources to do so."
Dive Insight:
The policy, instituted in 2013, said Wells Fargo customers could avoid a service fee on their Everyday Checking or Opportunity Checking account by making "10 or more posted debit card purchases and/or payments" per month. However, ATM withdrawals did not count toward the 10-purchase threshold, but the bank for years left it up to branch employees to verbally explain that distinction to customers, current and former Wells Fargo employees told The Capitol Forum in August.
The bank began sending alerts to customers in early 2018 indicating how close they were to the 10-purchase threshold, a bank spokesman told The Capitol Forum. And Wells Fargo’s most recent fee documents spell out the policy.
"We are working closely with our regulators to finalize a comprehensive remediation plan to compensate customers who may have been affected by the manner in which we described how using a debit card could result in the waiver of monthly service fees," Scharf wrote Monday. "We expect that remediation will begin in 2020."
Once the bank calculates the refunds, active accounts will be credited, Scharf wrote. Customers whose accounts are no longer active will receive checks by mail. Affected customers will receive a letter explaining the refund, and they are required to take no action, he wrote.
It is unclear how many customers are affected — Everyday Checking and Opportunity Checking are the bank’s most popular types of account, according to The Capital Forum. But roughly 90%& of customers successfully avoid paying servicing fees on checking accounts by meeting other requirements, Wells Fargo spokesman Jim Seitz told Reuters in May.
A number of scandals have damaged Wells Fargo's reputation in recent years — most notably, it was revealed in 2016 that bank employees opened millions of fraudulent accounts to receive sales-based incentives. An August report by The New York Times also revealed a policy that allowed Wells Fargo accounts to remain open even after customers thought they had closed them, prompting some customers to be charged thousands of dollars in overdraft fees.
But Scharf has taken steps to shift the culture since taking the bank’s top post in October. On his first day, Scharf wrote in a companywide memo that the bank would put "all available resources" toward making harmed customers whole, according to Bloomberg.
Scharf this week announced he hired Scott Powell, Santander’s former U.S. chief, as Wells Fargo’s chief operating officer. Powell will oversee regulatory execution and relations, among other functions, when he starts Monday.
