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Wells Fargo Is Trying to Fix Its Rogue Account Scandal, One Grueling Case at a Time

The Wall Street Journal. logo The Wall Street Journal. 12/27/2016 Emily Glazer

Aaron Brodie has been dogged by poor credit for five years, the result, he said, of a Wells Fargo & Co. banker giving him a credit card he didn’t ask for. Hearing about the bank’s civil settlement over alleged illegal sales practices, he called a Wells Fargo hotline, thinking help was at hand.

Wells Fargo told Mr. Brodie, 28 years old, an emergency dispatcher with the Fort Worth, Texas, police department, that there was nothing it could do since the account had been sold to debt collectors.

“I just want somebody to say, ‘Yeah, we did this. Yeah, we were wrong,’ and maybe have my credit cleaned up,” said Mr. Brodie. He said he now can’t qualify for a mortgage.

Wells Fargo is attempting a fix-it project with little precedent in the banking world, after being accused by federal regulators of forcing thousands of banking products on its unwitting customers.

First, it must determine how many customers had accounts and other services opened without their knowledge over the past seven years (an early, partial estimate tallied as many as 2.1 million accounts). Then it has to determine how these customers were affected—and how they should be compensated.

In many cases, measuring the damage requires pondering hypothetical scenarios: for instance, whether a customer’s lower credit score led to higher mortgage payments, or whether an unwanted credit card caused a customer to miss out on a loan entirely.

The bank is employing thousands of employees and consultants costing millions of dollars to solve these riddles. They are tough to crack. A good number of customers are too busy or unconcerned to respond to calls. Some customers coming forward have issues unrelated to the settlement.

How the bank responds will help determine whether it can restore its reputation and the fate of newly installed Chief Executive Timothy Sloan, who has made the cleanup process a central part of his job.

Mr. Sloan is in touch daily with executives leading customer-refund efforts and takes part in a weekly progress briefing each Monday at 7 a.m., said Justin Thornton, a bank executive who is helping to lead the customer refunding program.

“We also recognize that aside from the financial impact, we’ve broken trust with some customers and...our priority is to restore trust with our customers,” said Mr. Thornton.

Bank spokeswoman Mary Eshet said in a written statement Wells Fargo is contacting customers identified by the Journal “to ensure we resolve their situations to their satisfaction.”

The bank still faces a slew of state and federal investigations, including by the Justice Department and the Securities and Exchange Commission (it has said it continues to respond to requests for information). In November, new checking-account openings and credit-card applications fell by 41% and 45%, respectively, from a year ago.

Wells Fargo’s efforts were sparked by a September agreement to pay a $185 million fine to federal regulators and a Los Angeles city official for allegedly illegal sales practices, in which the bank didn’t admit or deny wrongdoing. At the time it had to put aside $5 million to compensate customers, of which $3.2 million has been paid out.

Many are skeptical the bank can make good on its promise to make things right by customers. During congressional hearings in September, Sen. Jon Tester (D., Mont.) asked, “How are you going to find those folks?”

Wells’s Ms. Eshet said the bank has “the experience, tools and processes to find and identify the customers.”

The bank stores customer data at centers around the country and in different technology systems, with, for example, credit-bureau-reporting data in Albuquerque, N.M., and mortgage data in Des Moines, Iowa. That makes it hard to look broadly at each customer or spot bigger patterns among different products, according to people familiar with the matter.

Just getting in touch with customers is hard in an age when many people don’t answer calls from unknown numbers or open emails that could be spam. By December, Wells Fargo had telephoned nearly 200,000 customers with unactivated credit cards they might not have known about, said a person familiar with the matter. About one fifth responded.

Even when customers come forward, many are finding the cleanup process frustrating. Hing Chow knew something was wrong with his elderly parents’ Wells Fargo account while visiting in April. Glimpsing their checking-account statement on the kitchen table, Mr. Chow saw a $30 monthly fee. His father, who is 96, and his mother, who is 84, couldn’t explain the charge.

A Wells Fargo banker signed up his parents, who Mr. Chow said speak limited English and have symptoms of dementia, for a checking account with a minimum required balance of $25,000 across their Wells Fargo deposit accounts. His parents have a much smaller balance and were hit by $690 in fees over 23 months.

When Mr. Chow, of Diamond Bar, Calif., brought this to the bank’s attention, Wells Fargo offered a $90 refund. A week after the September regulatory settlement, Mr. Chow translated into English a letter written by his father, Tuck Yu Chow, and sent it to the bank.

“All I can state is that my banker has always been very friendly to me and has asked me to sign different things,” the older Mr. Chow wrote, according to his son’s translation. “But I never asked my banker to change to this high-balance requirement account.”

Wells Fargo replied in an Oct. 11 letter reviewed by the Journal that it is a customer’s responsibility to review his or her monthly statements, and if the customer doesn’t report any issues within 30 days the bank considers the account statement correct. Wells Fargo denied the Chows’ request for an additional $600 refund, and said in the letter it considers the matter closed.

On Friday, after The Wall Street Journal asked Wells Fargo about the Chows’ case, the bank contacted the Chows and offered them a refund of $642.71, which included other charges the bank discovered.

Culver City, Calif.-based Mae Alfred said she realized about two years ago that Wells Fargo employees had opened at least five checking accounts for her husband. Ms. Alfred, 66, the owner of a facial-care business, said her 70-year-old spouse was also charged a total of $105 a month for three accidental-death insurance policies he hadn’t authorized. He learned about them only when the company began writing letters saying he needed to put money in his Wells Fargo account.

Ms. Alfred said she gave this information to the Los Angeles City Attorney’s office a few months ago and has been in touch with that office.

Wells Fargo customer agreements typically contain clauses requiring customers to take complaints to private arbitration instead of court, which can be less favorable to individuals.

In congressional hearings legislators pressed former CEO John Stumpf, who resigned in mid-October following public and political criticism, to allow customers to sue, and in December introduced legislation that would allow them to bypass arbitration.

The bank filed a motion in November in a lawsuit brought on behalf of Mr. Brodie and other customers to block their attempts to sue. Mr. Brodie’s lawyer filed a response Friday contending Wells Fargo’s arbitration agreements don’t cover illegal or fraudulent actions.

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The bank, which hasn’t given itself a deadline for the cleanup, said it is responding to customer complaints as quickly as possible and plans to make “significant progress over the next year.” It has set up a “Sales Practices Consent Order Program Office” run by Mr. Thornton where about 20 people have been assigned full time, Mr. Thornton said. Consultants from PricewaterhouseCoopers, hired before the settlement, remain camped out at the bank’s San Francisco headquarters.

To find potential victims, PwC created an algorithm to “tag” accounts with certain red flags: accounts that were closed within 30 days of being opened, checking accounts with a zero balance or just a few dollars and never-used credit cards, people familiar with the matter said. Also, a “resolutions team” is charged with examining whether new customer complaints fit accusations in the settlement.

David Marks, a Wells Fargo executive overseeing the cleanup effort related to consumer credit products, said the hard task will be untangling the damage that lowered credit scores may have caused. The three largest U.S. credit-reporting firms—Equifax, Experian and TransUnion—are each in discussions with Wells Fargo to determine how to address the impact on credit reports, according to people familiar with the matter.

“I’m not aware of anything like this ever happening in the past,” said John Ulzheimer, a former manager for credit reporting and scoring firms. “I’m not aware of anything in similar scope, scale or style.”

With a few exceptions, credit-reporting firms won’t remove anything from a consumer’s credit reports until the bank or another company that provided the information asks for it to be taken off. Meanwhile, removing a credit card from a customer’s credit report—even an unwanted credit card—can also harm a customer’s credit score.

Some customers received refunds before the settlement announcement. Kate Edwards of Rumson, N.J., was refunded $325.36 last year for fees on a credit card someone at Wells Fargo opened in 2014, shortly after she turned 18, by allegedly forging her signature on the application, according to her mother, Linda Edwards.

Linda Edwards said it took about a year of interaction with the bank and that she also contacted Democratic New Jersey Sen. Bob Menendez for help.

At least two of Kate Edwards’s credit reports reviewed by the Journal were adjusted after the bank said it instructed credit bureaus to remove any late information reported for the credit card.

The bank is trying to figure out whether a customer’s lowered credit score meant he or she paid more for a loan or were denied one by using hypothetical scenarios. For customers who paid higher rates on loans than they should have, the bank said it plans to refund them based on the industry interest rate at the time a loan was made. The bank said it hadn’t handled any of these situations as of early December.

Dusty Rhodes would like to see more of the settlement money. Wells Fargo opened seven savings accounts for him over two years that he didn’t want, Mr. Rhodes said. Some of those generated $10 fines for each month they sat without transactions or a minimum balance.

Mr. Rhodes, who is 62 and a website developer in Denver, has been calling Wells Fargo’s new hotline. He said he has been bounced around, talking to representatives in Utah, Idaho and Virginia. One local representative told him the bank could refund $81; another said the bank couldn’t do anything.

Mr. Brodie, who was rebuffed by the Wells Fargo hotline after the unauthorized credit card in his name, is unsure what to do next.

He said he didn’t know about the credit card until debt collectors alerted him to it. The card has collected more than $1,300 in fees, which he refuses to pay. He and his wife have struggled to get a mortgage.

He said he recently paid $2,000 to a credit-repair agency, which told him his current credit score, of about 490, would be about 125 points higher without the Wells Fargo credit-card history.

“I never authorized it, I never asked for it, I never signed any paperwork for it,” Mr. Brodie said. “I’ve been dealing with it ever since.”

Write to Emily Glazer at, Christina Rexrode at and AnnaMaria Andriotis at


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