Something of a large-scale and thoroughly disturbing matter recently came to light as Wells Fargo discovered that its incentive system might well have been rewarding the wrong behaviors.
Offering rewards for meeting certain sales targets—and ostensibly, punishments for failure—reports recently revealed that Wells Fargo were actively engaged in cross-selling activities, and possibly entirely too engaged.
The reports noted that Wells Fargo employees cross-sold to such a degree that they established completely separate deposit accounts for customers, and moved customers’ money around from one account to another.
Employees were also said to have submitted unauthorized credit card applications, issue and activate debit cards, and create completely falsified email addresses to place customers in various online banking services.
Reports from the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency note that Wells Fargo has received the highest fines ever issued as a result, $100 million.
Wells Fargo in turn fired 5,300 employees—about one percent of its workforce—as a result of the fraud, reports note.
The incidents date as far back as 2011, representing just over 565,000 unauthorized credit card applications filed, and around 1.5 million unauthorized deposit accounts.
Worse, customers ended up on the bad end of this, with around $400,000 in annual fees, overdraft protection fees, and interest charges charged to customers that were never actually authorized.
There are essentially three potential explanations behind what happened here. One, the employees went after big rewards for certain behaviors, falsifying new signups and the like to claim credit and reap the rewards therein.
Two, Wells Fargo demanded huge numbers of signups on pain of job loss if success wasn’t achieved, and so the employees simply protected themselves as best they were able, knowing that finding new jobs these days isn’t exactly easy.
Three, perhaps the most likely, is a combination of the two, as everyone had a hand in the blame.
We don’t know which of these was the case, and we’ll likely be hearing more about this as time goes on.
Yet in the end, we have one perfectly clear point: incentive programs, if not properly managed, can be dangerous.
Just ask the 1.5 million customers who had accounts opened they never asked for, those who paid out $400,000 in unauthorized fees, and Wells Fargo itself.