Wells Fargo Settles $ 72.6 Million Fraud Lawsuit Over Deceptive Customers
About half of the settlement ($ 35.3 million) will go directly to the 771 customers affected by the fraud, and about $ 37.3 million will go to the United States as civil penalties for violating financial regulations, according to Office of the United States Attorney for the Southern District of New York.
“We all trust our banking institutions to deal with us honestly, fairly and transparently when we are their customers. For nearly a decade, Wells Fargo abused that trust, using tricks, false information and other deceptive practices to fraudulently overcharge customers who used the bank’s foreign exchange service, ”the Bank said. American lawyer Audrey Strauss in a press release. Press release.
How Did Wells Fargo Overcharge Customers?
Wells Fargo provided foreign exchange services to business clients, many of whom were small and medium-sized businesses. These services included the conversion of foreign currencies into US dollars and vice versa.
To make money, Wells Fargo would buy the currency at a cheap price from one party and sell the currency to the other party at a higher price. The profit he made was referred to internally as a “spread” or “sales margin”.
The “spread” charged was much higher than the rates quoted to customers, and Wells Fargo secretly pocketed tens of millions of dollars.
One tactic was labeled the “Big Figure Trick”. Wells Fargo sales workers would claim to accidentally change double-digit transaction prices to charge customers more money. For example, if the purchase price of a euro was $ 1.0123, a Wells Fargo seller would use the big figure trick to lower the price to $ 1.0213, according to the Department of Justice.
When customers called them, employees claimed it was a typo, a mistake in entering numbers. Wells Fargo sales specialists have targeted less financially savvy companies in the hopes these customers wouldn’t surprise them making the adjustments.
“Wells Fargo created an atmosphere in which employees openly joked and celebrated taking advantage of the Bank’s customers,” said one. Press release of the Ministry of Justice.
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How Wells Fargo Misled Customers
“Wells Fargo FX (forex) sales specialists have used a variety of misrepresentation and deceptive practices to defraud customers,” the SDNY press release read. “For example, instead of applying agreed fixed spreads to clients’ outgoing transfers, FX sales specialists would charge inflated spreads as large as FX sales specialists thought they could get away with.”
When customers contacted the bank to inquire about the higher spreads, sales specialists gave them false or misleading explanations. In a few cases, sales specialists falsified datato give the impression that the final figures correspond to the negotiated rate.
Wells Fargo failed to properly monitor exchange rate spreads, the The Ministry of Justice has found. Sales specialists have not been given clear guidelines on how to legally track or execute trades, and the company’s percentage-based bonus structure has prompted fraud.
In response to a request for comment from USA TODAY, Wells Fargo wrote, “This past behavior was unacceptable. Since that time, Wells Fargo has paid approximately $ 35 million to fully remedy affected customers and has taken an in-depth look at our FX pricing practices and procedures. We have significantly improved our business policies, procedures and oversight related to the management and pricing of foreign exchange transactions. “
Last year the bank paid a $ 3 billion settlement for violation of anti-fraud rules with the Securities and Exchange Commission after discovering that from 2002 to 2016, sellers open millions of fraudulent accounts on behalf of investment bank clients and pushed them to buy products they did not need in order to achieve product-based sales quotas.
Michelle Shen is a Money & Tech digital reporter for USATODAY. You can reach her @ michelle_shen10 on Twitter.