Wells Fargo (NYSE:WFC)
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1 Year : From Oct 2016 to Oct 2017
By Emily Glazer
A group of Democratic senators asked Wells Fargo's chief executive for more details about the bank's recent boost in income from overdraft charges and whether it is related to its sales-practices scandal, according to a letter reviewed by The Wall Street Journal.
Senate Banking Committee Democratic senators led by Ohio Sen. Sherrod Brown and Massachusetts Sen. Elizabeth Warren asked why the San Francisco bank's income from overdraft fees increased at a rate roughly five times higher than its peers as noted in a recent Financial Times article.
"Wells Fargo's overdraft income has increased disproportionately to the rest of the banking industry in the same way that Wells Fargo's cross selling exceeded that of its competition," according to the letter. It added that compensation incentives for overdraft services in some cases were structured similarly to those for banking accounts and credit cards.
A Wells Fargo spokeswoman said the bank hasn't made any changes to its practices that would result in more or higher overdraft fees for customers. She added that the bank hasn't had any banker incentive compensation or sales goals related to overdrafts.
The bank paid a $185 million settlement in September for opening as many as 2.1 million accounts using fictitious or unauthorized customer information. It has been in the spotlight for the past four months over its sales tactics and faces a spate of federal and state investigations.
Overdraft protection allows customers to complete a transaction even if they don't have enough money in a checking account. The largest banks charge a fee, typically about $35 per overdrawn debit-card or automated-teller-machine transaction.
The senators, who include Sen. Jack Reed (D., R.I.), Sen. Bob Menendez (D., N.J.) Sen. Mark Warner (D., Va.), Sen. Brian Schatz (D., Hawaii) and Sen. Chris Van Hollen (D., MD.), also cited reports from The Wall Street Journal that former and current employees detailed improper sales tactics related to overdraft protection services. In October, the article highlighted instances of managers pushing bankers to sign up customers for potentially costly overdraft protection that they didn't always need or realize they were getting.
The Wells Fargo spokeswoman reiterated Wednesday that the bank has adhered to a 2010 regulation that requires customers to opt into overdraft protection. The bank won't charge an overdraft fee on a one-time debit card transaction or ATM withdrawal without specific customer consent, she added.
The senators asked Wells Fargo for a host of information by Feb. 14.
They seek specific information related to overdraft-protection products, including sales goals, amounts of overdraft fees charged to customers and company policies related to overdraft, saying a response to a similar question asked in late September was "vague and incomplete."
They also asked for a breakdown from 2007 to present of the monthly income Wells Fargo has received from overdraft fees; customers signed up for overdraft protection without their consent; and employees who received increased pay for meeting sales goals related to overdraft products or those disciplined for not meeting those goals.
The senators, among seven other requests, also asked for information related to policy changes regarding fees, refund requests or other issues in the last 18 months.
The spokeswoman said the bank made two changes in 2014 to "reduce overdraft incidents" but also lowered its overdraft fee income in 2015. From 2015 to 2016, Wells Fargo's total overdraft fee income grew, she said, "due to a number of factors, including primary customer growth and increased account transaction activity," according to the statement.
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(END) Dow Jones Newswires
January 11, 2017 21:37 ET (02:37 GMT)
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