The city of Los Angeles’ lawsuit against Wells Fargo & Co. unleashed an outpouring of anger from customers and current and former employees who said the nation’s third-largest bank saddled clients with unwanted accounts, unwarranted fees and untold hardships.
From Florida to Montana and throughout California, they recounted Tuesday aggressive sales tactics that snared unwitting victims. Some customers who noticed problems said they found it difficult to correct the mistakes, much less recover all the charges.
The lawsuit, filed by City Atty. Mike Feuer, alleged that the bank’s high-pressure sales culture set unrealistic quotas, spurring employees to engage in fraudulent conduct to keep their jobs and boost the company’s profits.
“In its push for growth, Wells Fargo often elevated its profits over the legal rights of its customers,” Feuer said Tuesday in announcing the suit.
Business owner Ken Wallman figures he was one of the luckier ones.
About two years ago, he went into a Wells branch in Marina del Rey to open one checking account, signing several documents to get it going. About six months later, he said, he learned he had a dozen additional accounts he never authorized, and some were dinged for monthly fees.
Wallman said that after many attempts to fix the problem, he eventually got the bank to “weed out the erroneous accounts and reverse some fees,” but he’s sure some charges slipped through “and cost me money.”
The allegations against Wells Fargo could damage the bank’s reputation and probably already are being looked into by regulators, said G. Michael Moebs, who heads industry research firm Moebs Services Inc.
“This is a fundamental reputation problem with any depository in the world. You don’t want this happening,” Moebs said.
Regulatory officials at the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau declined to comment.
Wells Fargo declined to comment on specific stories from customers or former employees.
“We will vigorously defend ourselves against these allegations,” the bank said of Feuer’s lawsuit. “Wells Fargo’s culture is focused on the best interests of its customers and creating a supportive, caring and ethical environment for our team members.”
The bank said it provides training, audits and processes “that work together to support ... our commitment to customers receiving only the products and services they need and will benefit from.”
Feuer launched his investigation after a December 2013 Los Angeles Times report based mainly on interviews with some three dozen current and former Wells employees and a review of internal bank documents and lawsuits filed against the bank.
The employees described how staffers, fearing disciplinary action from managers, begged friends and family members to open ghost accounts. The employees said they also opened accounts they knew customers didn’t want, forged signatures on account paperwork and falsified phone numbers of angry customers so they couldn’t be reached for customer satisfaction surveys.
Wells Fargo has long heralded its unrivaled success in selling additional accounts and services to customers. Last year, about 26% of the company’s revenue was from fee income, including those from credit and debit card accounts, trusts and investments.
Fee income is a crucial part of banking revenue, Moebs said.
“You’re looking at well over 85% of all depositories — banks, credit unions and thrifts — which, if they didn’t have fee income, could easily go belly-up,” he said.
The tactics described in the lawsuit could not only harm consumers but also damage their credit scores, Feuer and consumer advocates warned. Wells Fargo, for instance, put customers into collection when fees for unauthorized accounts went unpaid, the suit alleged.
Down the line, for instance, borrowers seeking mortgages or car loans could end up paying higher interest rates because the bank’s actions could have lowered their credit scores, said Norma P. Garcia at advocacy group Consumers Union, publisher of Consumer Reports magazine.
“If you don’t pay on time you risk a lot,” she said. “There is a lot going on behind the scenes that could cost you money.”
Garcia said consumers who notice unauthorized accounts or activity should immediately call their financial institution, cancel the transactions and demand refunds of any charges.
Feuer said Wells Fargo clients should call his office immediately at (213) 978-3393 if they notice checking or savings accounts have been opened in their names at the bank without their permission.
The city’s lawsuit alleged that the root of the problem was an unrealistic sales quota system enforced by constant monitoring of each employee — four times a day.
“Managers constantly hound, berate, demean and threaten employees to meet these unreachable quotas,” the lawsuit said.
Maged Nashid, a former Wells Fargo manager in Southern California, said Tuesday that he was fired for questioning practices similar to those alleged in Feuer’s lawsuit. Employees who opened fraudulent accounts usually attached them to bogus mailing addresses, Nashid said.
“The client would never be aware of it,” he said. “The only way to actually find out about it is through the online banking.”
Randall A. Marquis, who has written about bank fraud as an editor at an industry publication, said Wells employees twice opened accounts for his 79-year-old grandmother and took money from her existing account.
“It was not fun to see her crying and saying, ‘I want them to leave me alone.’”
Khouri reported from Los Angeles; Puzzanghera from Washington, D.C.
Times staff writers E. Scott Reckard and James Queally in Los Angeles contributed to this report.