STEVE INSKEEP, HOST:
Some other news - the one big bank that kept a good reputation during the financial crisis may be losing some of it. Wells Fargo was accused of fleecing the ordinary customers who walked into branch banks. The Los Angeles city attorney is now suing over nationwide practices reported by the LA Times. The suit grows out of the way Wells Fargo makes its money - less on big Wall Street trades than an ordinary bank business - checking accounts and mortgages, that sort of thing. The lawsuit alleges Wells Fargo tried too hard, imposing unrealistic sales quotas on employees, who then opened up new accounts for credit cards in customers' names without them knowing. E. Scott Reckard first reported on these practices for the LA Times.
E. SCOTT RECKARD: What we're talking about is people getting accounts opened - credit cards, debit cards - without any need or without their own permission. Sometimes the employees apparently became so desperate that they used their own money to fund these things just so people can make quotas. But other times, it was much worse. Sometimes they falsified sort of passwords and accessed customers' deposits, raided them and opened up new accounts. At the first place we looked into, there was said to be one employee who would opened something like 17 accounts for her grandmother to meet her quotas.
INSKEEP: Wait a minute. You're not saying that these are high-pressure sales tactics in every case. You're actually saying there was no sales tactic. They just sold it. They just took the money.
RECKARD: Well, what we're talking about is sales pressure that came down on employees. So what went wrong seems to have been is this sales machine that just exerts tremendous pressure from the top down. Our best sources were really the branch managers, who described how regional managers would grill them four times a day on whether they were meeting sales quotas. And then, of course, the branch managers would pressure the bankers and the tellers. Even the tellers have quotas for referring people to bankers on products. So a lot of the people I've talked to described actually getting sick from the stress in these offices. And that's when you see them start cheating to meet their sales goals.
INSKEEP: What is Wells Fargo's defense to these complaints?
RECKARD: Well, what Wells says is, look, we do emphasize sales - everybody does. But this is an attempt to identify our customers' needs and try to satisfy them all. They say that from very beginning, they are provided ethical training, updates on what to do and what they can't do. The problem is not that those messages aren't heard. The problem the employees say is that they often get very different messages from the regional and branch managers.
INSKEEP: I want to understand a little better how some of these transactions worked on the teller-to-client level. Are you saying there are instances where there's somebody who, you know, isn't very familiar with banking, they're not sure what they need and Wells Fargo talked really fast and sold them stuff they didn't need? Or are you saying it's more often that there wasn't even a conversation with the client? They just got signed up for services they never knew about.
RECKARD: Well, what a lot of the customers who contacted us - what they said is that they specifically had conversations about products that they said that they didn't need. And then they wound up getting them anyway. Other people said that they went in, insisted that these accounts be closed, but they never were. Others said they were assured that there would not actually be a fee on the accounts, so why not get that credit card? And then one would pop up months later.
INSKEEP: Did you run across any customers who were financially wrecked by this?
RECKARD: There were customers who were severely financially damaged. I don't know if I would use the word wrecked, but there were a lot of people who had money taken out of their accounts. The lawsuit describes how people were put into collections, so you had bill collectors calling you up on accounts that you didn't want and hadn't paid.
INSKEEP: So was the calculation here for Wells Fargo that if they can get an extra $1,000 out of every customer or even an extra $100, an extra $10 out of every customer that - that that adds up to serious profits for them because there are so many clients.
RECKARD: That's exactly right. This is not something that is unusual. All banks sort of use checking accounts as loss leaders, but then they make a lot of money. The ideal is to get as many financial products with each customer as you can, but Wells is the king of this. This is how it really makes a lot of money.
INSKEEP: Has reporting this story for a couple of years changed at all your - your approach to your local bank?
RECKARD: (Laughter) You know, it surprised me. Like a lot of people, I mainly use ATMs and do online stuff. But I had not realized what it has become is a sales floor. That's what these branches are.
INSKEEP: Scott Reckard of the Los Angeles Times. Thanks very much.
RECKARD: Thank you very much for having me on. Transcript provided by NPR, Copyright NPR.