Like a mushroom cloud, the damage caused by the massive Wells Fargo scam continues to grow, affecting over 500,000 customers thus far...
You see, between 2011 and 2015, some 100,000 unsuspecting Wells Fargo & Co. (NYSE: WFC) customers were smacked with $1.5 million in overdraft, maintenance, and annual fees -- on credit accounts they'd never opened.
This was just the initial damage caused by a widespread scam WF employees hatched. They'd secretly opened hundreds of thousands of accounts without clients' knowledge, in an attempt to hit aggressive sales goals.
"At the time, the big bank didn't admit to any wrongdoing."
About 14,000 WF customers wound up incurring huge additional expenses -- a cumulative $400,000 in charges -- because the annual maintenance fees and costs associated with interest had not been addressed for several years.
But these extra fees and fines seem to be just the beginning...
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That's because on Tuesday (Sept. 20), Wells Fargo CEO John Stumpf, who has been at WF's helm since 2010, testified before the Senate Banking Committee about his financial institution's scam.
And what Stumpf revealed suggests customers' credit scores have likely been impacted as well - and not in a good way...
The Wells Fargo Scam Has More Collateral Damage Than You Know
Revelations about possible damaged credit scores became apparent during Tuesday's hearing when Sen. Jon Tester (D-MT) asked Stumpf, "If customers were unaware that these accounts were opened up, there must have been instances where that negative information was sent to credit bureaus."
Stumpf responded by acknowledging the charges might have affected consumers' credit scores. "I know that when a credit bureau is requested, it has an impact on your credit score," he said, before adding, "Yes, we pull[ed] a credit bureau for each one of these cards."
This is bad news for all of the Wells Fargo customers involved...
Having multiple inquiries into one's credit history can have a negative impact on an investor's credit score, particularly if these inquiries occur over a short span of time. This is because multiple applications for cards in a short span suggests the investor is a riskier borrower than one who applies less -- no questions asked.
And since 14,000 of the unauthorized credit cards racked up significant fees and those fees were left unpaid, the resulting negative impact may have seriously damaged these unsuspecting customers' credit scores.
The kind of damage that has long-term consequences for these Wells Fargo customers...
Particularly if an investor's tainted score is used to determine the interest rate on a 30-year home mortgage, for example.
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In fact, according to The Los Angeles Times on Friday, Sept. 23, Goldman Sachs Group Inc.'s (NYSE: GS) analysts attempted to determine the cost these customers potentially face when it comes to higher interest rates on mortgages. The financial firm found that they could be looking at approximately $50 million in higher interest expenses overall.
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On Tuesday, Stumpf told the Senate committee that Wells Fargo is rigorously trying to fix the massive problem and that the bank has already started to contact customers to determine if each credit card was correctly opened upon a customer's request.
"If they want it, we don't want to take away their credit," Stumpf said. "If they did not want it, we're going to go back and make sure it's made right by the credit bureau and made right by the customer."
A $185 million agreement was reached on Thursday, Sept. 16, between Wells and federal authorities over the scam...
At the time, the big bank didn't admit to any wrongdoing.
However, Stumpf's testimony before Congress last week seems to show Wells Fargo's misbehavior is anything but undeniable at this point.
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Money Morning Capital Wave Strategist Shah Gilani, who is considered one of the world's foremost experts on the credit crisis, says the Wells Fargo scam was encouraged by the pervasive "trickle-down" bankster culture that puts a premium on profit above, well, everything else.
So when the Wells Fargo scandal broke headlines, Gilani wasn't a bit surprised...
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Related Articles:
- The Los Angeles Times: Wells Fargo's Collateral Damage: Customers' Credit Scores