Wells Fargo's Pay-For-Performance System

Mr. Chen came to our office just now to deliver a document. He wanted to make an appointment with you on Monday afternoon. He said he would like to discuss with you whether we should send an attorney letter to BOA and Wells Fargo regarding his case.

On September 8th, Wells Fargo’s misconduct was exposed when the Los Angeles City Attorney, the Consumer Financial Protection Bureau (CFPB), and the Office of the Comptroller of the Currency (OCC) fined the bank $185 million, alleging that more than 2 million bank accounts and credit cards were opened or applied for without customers' knowledge or permission between May 2011 and July 2015. In response, Wells Fargo fired 5,300 employees and, in an official statement, expressed their regret over the actions those employees had taken in regards to their customers. Wells Fargo also announced that it would be ending its controversial employee sales goals program. Wells Fargo’s employees sales goals program was an incentive-driven compensation program where employees earned financial awards based on the number of financial products they could sell, all under the pressure of satisfying exorbitant sales goals set by the upper management at Wells Fargo.

Wells Fargo is one of the four largest banks known as the “Big 4” along with Bank of America, Chase, and Citibank. Each one of these bank holding assets are well above the low billions. Within in the last couple of weeks, there have been many reports in the media regarding the illegal banking practices of Wells Fargo. Federal prosecutors have launched a probe into Wells Fargo’s unscrupulous and intense sales tactics.

In 2016, federal regulators caught Wells Fargo, creating millions of fake bank and credit card accounts; over 1.5 million bank accounts were created. Furthermore, federal regulators also said that 565,443 credit cards were created, and 1400 of those accounts had been charged over 400,000 dollars in fees. Wells Fargo employees broke many ethical and legal boundaries and engaged in counterproductive work behavior.

Upon first glance at the Wells Fargo State Bank you don't think much of it. The cylinder shaped building, with crisp white walls and lined paneled windows gave a distinct modern feel. The brown stained glass not allowing viewers to see inside of the building just added on to a more mysterious and independent feel that the entire building seemed to project. Near the entrance you will notice a circular stone bench, in the center of that is a tree. It was as if it were trying to lure people in with the simple yet pleasing design. However, once you enter the building you will notice a drastic change in the environment surrounding you. The air is still and empty. You realize it wasn't the stained glass that was keeping you from seeing in but

The Wells Fargo scandal originated back in 2011 when employees created over 1.5 million fraudulent bank and credit card accounts for their customers and charging the customers fees for these accounts that they didn’t know they had. The employees were given sales quotas that were clearly unrealistic and pressured to use unethical policies for obtaining them.

The ethics of the bank requires that there is ethics of integrity. It is supposed to be created through a culture in the bank and it should be one of the banks priorities because this is a business and they gain the profits from the people they serve on daily basis. Even if the bank shall survive this wave of scandal is so difficult now to convince any client to join this Wells Fargo which shall cause them a lot of money. Also all the old customers may start withdrawing and looking for other banks which they feel are more secure when they are keeping the money for them. It is so hurting and distrustful for a banking instead of accruing money in the accounts of their customers what they wells was doing was that it was misusing their money and giving them extra fees.

After Wells Fargo acquired Wachovia they added 12 different legal issues in three years to their already cumbersome legal actions. Therefore, Wells Fargo had to participate in a transitional and transformational change to help decrease the amount of unethical behavior that Wachovia and Wells Fargo had been participating in. Furthermore, during the changing process Wells Fargo leadership had to take into consideration a plethora of factors to include who needed to change, who was going to oversee the change, what needed to be changed, why the change needed to happen, how the change would happen, the scope and the amount of time the change would need to take place. Until recently, the Wells Fargo organization had

Another way is the bank should have had a way where they can check for accounts that haven’t been active in about twelve months; this would have prevented many cases where customers were not aware that these accounts were being opened. Wells Fargo should have invested on a system where it would check customer complaints of unusual account openings that they didn’t recall opening, and check with the customer for verification. Furthermore, another best way they could have prevented such scandal is if they terminated employees for fraud and ethical violations, for example, the management of the bank whom allowed and pressured their employees to sign up customers for accounts they didn’t authorize to meet their quota, these staff members should have been investigated and terminated. I think Wells Fargo learned to listen to employee and customer complaints and investigate more thoroughly. I also feel they now know to truly be a community based bank that’s really about its community. That scamming people just got them into a hole that they will really have a hard time getting out of, and not just because of money but because of people losing their trust in the company. Now its just about Wells Fargo’s road to

This fear and intimidation was brought on by the extreme sales goals set by the company, which included selling various products to every day depositors who only wanted to maintain their standard checking account. Each employee was expected to push at least eight other accounts on these customers and they would be monitored on a regular basis to be determined if they were meeting their required quotas (Hightower, 2016). All this pressure pushed from management to the employees would squeeze employees to their breaking point, which was all for the sole purpose of CEO Jon Stumpf and his board of directors to drive up values on the Wells Fargo stock and put millions of dollars in their own pockets while others suffered (Cameron, 2016). Based

Wells Fargo’s scandal of involving the sales of credit and debit cards, and traditional banking services which have led to the payment of million fines to the U.S. Consumer Finance Protection Board in 2016. The fiasco was caused by the fraudulent cross-selling of employees which have violated consumers' trust. Valuable lessons to be learned from the scandal including taking employees seriously and designing incentives with care are also offered for the future.

Thirdly, they should place new plans. If Wells Fargo wants to promote itself again, it should come up with new plans and more strict policies so that the new customers would feel safe and comfortable. Well Fargo should also offer more benefits than its competitors in order to attract more customers. It should also be more careful this time and not let anything like the scandal take place again, because it would be a disaster for the company people won’t trust them again.

Wells Fargo CEO will need to restructure customer service for the benefit of the customer, employees that in turn results in more profit for the shareholders. The company says they have improved recruiting and retention in the wake of the sales scandal. The bank has made big changes to how it compensates and evaluates employees in its branches. Wells Fargo has stopped paying branch workers based on how many products they sold and increased its minimum wage to a pay rate range of $13.50 and $17 per hour depending on the market they work in.

The company has already lost many customer and accounts due to this scandal. Bad management was another component in this scandal and to regain the communities’ trust, they have to adopt different management practices. Although the company did get rid of their sales goals program, the company will still practice cross selling without fraud and theft. Wells Fargo is known for their history of successful cross selling to customers. They do not plan to change that, however they plan to do it without such impossible goals. As Stumpf said, he still believes in cross selling, and that it was ”shorthand for deepening relationships” (Reuters,

The bank relied on customer service representatives to cross sell its products and hit sales quotas. Because there was much demand on the representatives, they began fraudulently opening customer accounts. (Fortune) Though the accounts were closed before customer realized, some customers were charged fees or their credit was affected by the situation. (Fortune) The bank was forced to return $2.6 million in fees and had to pay $186 million in fines to the government. (Fortune) Wells Fargo has shown to its consumers that they cannot be trusted. The bank’s former CEO John Stumpf resigned and was revoked of his bonuses and stock worth about $60 million. (Fortune)