A Wells-Spring of Post-Merger Glitches
As Wells Fargo Bank digests its massive takeover of First Interstate Bank, the hiccups that normally accompany such a process are causing heartburn for some customers.
Some disgruntled individual customers are becoming increasingly vocal about the conversion of their accounts, the closure of neighborhood branches or the way the bank is notifying them of changes.
Some business customers, meanwhile, complain of errors in statements, delays in wire transfers and changes in loan terms.
Wells itself acknowledges unusual glitches since the merger process began in earnest in April. The process is expected to be completed this weekend in California.
Last week, the bank delayed the processing of $40.3 million in direct-deposit payroll accounts. And last month, it sent out thousands of erroneous small-business loan statements--a problem that prompted a senior Wells executive to send out an apology letter to business customers.
Wells said those problems were unrelated to the merger and resulted from human error. Overall, the merger is going “probably as good as we hoped it would go, maybe even better,” said spokeswoman Kim Kellogg in San Francisco.
“There have been very few things we didn’t anticipate. There’ve been a few glitches, but that’s fairly typical of a merger of this size,” she said.
Indeed, many Wells Fargo or former First Interstate customers said the transition has been seamless for them.
“They’re wonderful people, and they’ve been more than courteous,” said Ron Sennett, 69, a Los Angeles retiree who has been banking since 1985 at the First Interstate branch at 3700 Wilshire Blvd., which closed last weekend.
Others aren’t so sure. Problems are typical of big bank mergers. But some experts said Wells’ most recent problems appear to be out of the ordinary.
“I don’t remember hearing anything like this,” said Anil K. Kashyap, a professor of economics who has studied bank mergers at the University of Chicago’s graduate school of business. “There’s a confounding effect in that people have gotten so much more automated . . . that the potential to screw up is so much bigger.”
In any case, competitors said the problems have been enough to persuade many customers to take their business elsewhere.
Glendale Federal Bank, which has mounted an aggressive and cheeky marketing campaign to win over Wells Fargo customers, said it is opening 10,000 new individual and 1,500 small-business checking accounts a month, mainly for disgruntled Wells customers.
Wells Fargo is “the biggest single source of new customers I have,” said Glendale Federal Executive Vice President Robert Trujillo.
When Bank of America took over Security Pacific National Bank in 1992, it experienced a similar flood of customer complaints about branch closures and account conversions.
In the end, BofA said it retained 95% of the combined banks’ accounts, despite the closure of 518 branches and the sale of 220 more. Bank of America now has 1,960 branches, about half of them in California.
By comparison, Wells Fargo is closing 254 branches statewide and will end up with a network of 1,178 locations with staff, though many will be in supermarkets and other retail sites.
The bank won’t say how many of its customers are closing their accounts, but it said the rate of closures has remained constant since the merger was announced.
Some customers said their biggest complaint is the inconvenience of taking their business to another branch.
Bruce Fischer, 38, originally opened his checking and savings accounts at First Interstate when Bank of America took over his old Security Pacific branch years ago.
He said he’s considering switching his account to a smaller institution now that the Wilshire Boulevard branch is closing.
“I just don’t like big banks,” said Fischer, a computer analyst who lives in Glendale. “I like stability, but I don’t like this gobbling up of one big bank by another.”
Some Wells customers have protested neighborhood branch closings, to no avail.
Neighbors in west Garden Grove mounted a petition and letter-writing campaign to keep their Valley View Street Wells Fargo open and last month picketed the branch.
Closing the branch and moving the business to Huntington Beach several miles away would seriously affect the district of small businesses and the retirees who can now walk to the branch for personal services, the protesters argued.
Wells said it is not unusual for some customers to protest branch closures. Spokeswoman Kellogg adds that accounts in the majority of closed branches are being transferred to Wells Fargo branches within a mile of the old site.
Business customers have bigger complaints, which some observers said go beyond the usual problems of a big merger.
The most notable was the delay last week in the posting of millions of dollars of direct-deposit payroll and other funds for 119 institutional customers, including UCLA.
Thousands of UCLA employees had their paychecks credited a day late because of a data-processing error.
Wells denied that the problem resulted from the merger of the two banks’ automated accounting systems, but UC officials believe it was directly related. They are considering whether to pull the business from Wells altogether.
Meanwhile, thousands of business customers who had a “BusinessLine” of unsecured credit received erroneous statements from Wells Fargo last month overstating both their August monthly periodic finance rate and the annual percentage rate.
The actual charges were not overstated. But the error prompted a July 26 letter of apology from Larry Gurnack, a Wells senior vice president.
The letter said in part: “I wish you could see my face. It’s bright red.” The bank corrected the problem, which it attributed to typographical errors, and offered customers a prepaid calling card in apology.
But some small-business customers remain angry. Marilyn Pink, who operates a museum cataloging and print dealership called Museum Systems in Brentwood, said the bank changed her First Interstate interest-only home equity and unsecured business credit lines without adequately informing her.
As a result, she said, she was surprised to find the monthly payment on her home equity loan increased from about $47 a month to more than $300. Letters and calls have not changed the situation, she said.
Kellogg said Pink should have been notified of the changes before they occurred. She added that if Pink calls the bank’s National Business Banking Center, set up specifically to help business customers, she should be able to transfer her credit lines to more appropriate ones.
At an escrow company in Glendale, meanwhile, a switch-over of accounts has resulted in delays in the wire transfers of hundreds of thousands of dollars, sometimes for days, said an escrow officer who spoke on condition of anonymity.
“We were notified in writing that our account would convert from First Interstate on Aug. 10. I came to work on July 29 and tried to send a wire transfer, and we were told our account was invalid,” the officer said.
“What’s really worse are the incoming wires,” which were being sent to an inactive account, she said. “It’s taking almost two days . . . and hours of my time on the phone screaming to get confirmation of the incoming wires.”
Kellogg said the escrow company was notified that its account converted on July 27, not Aug. 10. But the company’s local branch changed from a First Interstate to a Wells Fargo branch on Aug. 10, and there may have been some miscommunication.
Observers said such problems are sure to crop up as the merger process continues.
“As we have seen clearly, effective management of a merger . . . is not easy,” said Miguel Cela, a partner with Ernst & Young and a specialist in bank mergers.
“When it gets to the size of large banks, any minor blip becomes extremely visible to the point it shows up. . . . Sometimes the mundane details . . . are not fully addressed, and they can turn out to be more costly than anyone anticipates.”
