Senator Elizabeth Warren is demanding immediate explanation from Wells Fargo about a report that accounts closed by customers had been keep active and as result continued to generate overdraft fees.
The former business school bankruptcy law professor Warren, who is running for the Democratic presidential nomination, wrote in a letter on Monday to acting Wells CEO Allen Parker stating that the bank “still fundamentally broken” years after its fake-accounts scandal in 2016 despite empty promises for improvement.
“These new revelations raise grave concerns that despite these assurances, Wells Fargo is still fundamentally broken and has not only continued to scam customers out of thousands of dollars with impunity, but has even targeted customers who were attempting to leave the bank — and may have been victims of previous scams — to unfairly collect one final set of lucrative fees,” Warren wrote in the letter, dated Monday and circulated publicly on Wednesday.
The Massachusetts Democrat has long criticized Wells Fargo and the leadership of former CEO Tim Sloan for deceptive practices. Her latest letter, directed to interim CEO and President C. Allen Parker, was triggered by a recent report by the New York Times that Wells Fargo has continued to charge overdraft and other charges to customers even after closing their accounts for one of a myriad reasons.
The report used Xavier Einaudi, a small business owner who banked with Wells, as its primary example.
Here is what happened according to the New York Times:
Few months ago, Wells Fargo informed one of their customers, Xavier Einaudi, that it would be closing all 13 of the checking accounts he had with the bank related to his roofing company, CRV Construction. When asked why it was closing the accounts, the bank replied that the issue was “confidential”.
Einaudi went to his local Wells branch and picked up a check compensating him for the contents of the accounts. On June 27, the bank said, the accounts would go defunct, and no more transactions would be allowed.
As it turns out, that wasn’t exactly the case.
Shortly after the closure date, Einaudi realized that Wells had kept some of the accounts active with a zero balance. Meaning that some of Einaudi’s payments to vendors like his insurer and his Google advertising accounts continued from the empty accounts. But this time, each transaction was accompanied by a $35 overdraft fee.
By the time Einaudi realized what was going on, he had wracked up thousands of dollars in overdraft fees.
Payments to his insurer, to Google for online advertising and to a provider of project management software were paid out of the empty accounts in July. Each time, the bank charged Mr. Einaudi a $35 overdraft fee
Mr. Einaudi called the bank’s customer service line, but nobody helped. He went to his local branch, but nobody helped him. “They told me, ‘The accounts are closed out – we cannot do anything.'”
This left Einaudi in an untenable position: The accounts were technically closed, but he was still being hit with overdraft fees that nobody at the bank could stop. By the middle of July, Einaudi owed the bank nearly $1,500.
But as it turns out, Einaudi wasn’t alone with this problem.
Wells has failed to address these complaints from customers and employees, including one in the bank’s debt-collection department who grew concerned after being hit by an estimated $100,000 in overdraft fees over eight months.
Customers say the bank should wipe these fees, since they were unfairly and arbitrarily charged on accounts that the bank had deliberately closed without its customers requests.
It’s not clear, exactly, how many customers have been affected by this glitch. But many angry customers have reportedly filed complaints with the Consumer Financial Protection Bureau.
Robust discussions about the issue have continued on websites like Reddit and Quora, while some have expressed their misgivings with Wells.
“I don’t even know what happened,” he said.
Einaudi’s problem stems from the way Wells’ computer system processes closed accounts.
New York Times reported that accounts that customers believe to be closed can, in fact, stay open for months past their closure date if there’s a balance, even if the balance is negative (from fees charged by the bank).
And each time a transaction involving these accounts happens, the banks tacks on a fee.
Since the financial crisis, Wells has reportedly paid more than $15 billion in settlements to resolve investigations into its deceptive business practices, including the ones described above.