Report: Fake Account Fiasco Could Cost Wells Fargo $4B, Thousands Of Customers

Image courtesy of Mike Mozart

As Wells Fargo continues to grapple with the consequences of its potentially decade-long fake account fiasco, we’re beginning to see what the future might hold for the banking giant: a large loss both financially and in its customer base. 

While Wells Fargo has already been ordered by federal regulators to pay $185 million for its high pressure sales tactics that led to the opening and closing of millions of customer accounts without consent, analysts believe that fine is just a drop in the billion-dollar bucket.

CNBC cites analysts who estimate that before the scandal is all said and done, the bank could lose up to $4 billion in revenue over the next year.

A large chunk of that loss could come from an exodus of customers, as a recent survey by cg42 found that up to 30% of the Wells Fargo’s account holders could leave as a result of bank’s recent issues.

According to the report, while just 3% of customers surveyed were actually directly affected by the cross-selling scandal that saw employees enrolling customers in accounts they didn’t need, about 14% are projected to switch banks.

“While the lion’s share of Wells Fargo customers we surveyed had not directly reported being affected by the scandal, it didn’t matter,” Steve Beck, founder of cg42, tells CNBC. “The breach of trust the scandal created has fundamentally changed the way that they think about their institution, the way they think about the bank.”

And the way customers think of the bank isn’t exactly positives, cg42 found. Prior to the scandal, 60% of respondents had a positive impression of Wells Fargo, but that fell to 24% after news of the scandal broke. Conversely, negative perceptions of the brand increased from 15% to 52%, CNBC reports.

Although Wells Fargo did not reply to a request for comment on the survey, The Charlotte Observer reports that recent bank disclosures show customer visits have fallen steadily after the Consumer Financial Protection Bureau, along with the Office of the Comptroller of the Currency and the Los Angeles city attorney, announced the bank would pay more than $185 million in refunds and penalties for its practice in cross-selling products to customers.

According to disclosures [PDF] the bank made earlier this month, customer visits with bankers in branches fell 10% in September, while credit card applications fell 20% and consumer checking account openings fell 25% compared to rates in 2015.

In an attempt to retain customers, The Observer reports that Wells Fargo plans to launch a national TV campaign addressing the scandal.

The commercials, which began to air on Monday evening, focus on the steps the bank has taken to address the issues, such as eliminating sales goals and compensating customers.

Wells Fargo fallout could tally $4 billion in revenue, up to 30% customer drop, study says [CNBC]
Wells Fargo to start national TV commercials addressing sales scandal [The Charlotte Observer]

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.