The prospect of big bank deregulation in light of the outrageous ongoing criminal activity – because that's what it is – at Wells Fargo & Co. (NYSE: WFC) makes me cringe.
Last week, the U.S. Federal Reserve, the principal regulator of America's systemically important financial institutions (SIFIs), proposed the first big bank-friendly rule changes under the Trump administration.
Have you heard about this? No, probably not.
Maybe it was because the changes, which are mostly revised capital and stress test rules, must go through a comment period before they can be adopted, and that's why the news wasn't front-page worthy.
Apparently, neither was talk last week that the Consumer Financial Protection Bureau (CFPB) could possibly fine Wells Fargo $1 billion for egregious auto insurance and mortgage lending abuses.
And, no, the mortgage abuses aren't legacy issues from the financial crisis era; they're a new rip-off.
Here's what the news neglected to mention, and what it means for your money.
Back in the Day…
For those of you who have been with me for a while, you may remember back in September 2016 when I wrote about the scandal Wells Fargo had gotten themselves into. Pardon me, the criminal activity they were engaged in.
If you're new, here's the quick fix on what happened…
Customers of WFC were subjected to identify theft, forgery, and fraud. Some 3.5 million of them whose names, Social Security numbers, and emails were used to open deposit and credit accounts without their knowledge were paid back false fees they were charged – totaling $5 million.
What sickens me is the extent of criminal activity employed, bearing on a staggering 3.5 million customers, to rake in a paltry $5 million of fees. Granted, the fees would have kept coming if the scheme hadn't been discovered.
As far as audacity and criminality, how insane are the minds who believed fleecing 3.5 million customers would be justified by some piddling fee income and not be discovered?
That's Just the Tip of the Iceberg
The "get out of jail card" Wells got from the CFPB for those crimes wasn't exactly a free pass. For their criminal activity, Wells paid a $142 million fine – the largest in the short history of the CFPB. Of course, no one went to jail.
However, it turns out that the criminal activity was only the tip of an iceberg; I say "an iceberg" because there may be others floating under the surface.
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The latest activity uncovered, which the CFPB is presumably considering a $1 billion fine for, is a lot more of the same low-life, petty criminal activity you'd expect from two-bit, flimflam financial crooks.
One scheme involved layering expensive liability coverage onto customers who had taken out auto loans with Wells. Since auto loan customers are supposed to carry insurance that covers the loan guarantor, Wells figured if the customer didn't have insurance, it could "force-place" insurance onto them – and add the cost to their monthly bills.
It doesn't matter that other banks like JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corp. (NYSE: BAC), and The PNC Financial Services Group Inc. (NYSE: PNC) don't force-place insurance on their auto loan customers.
What matters is Wells did, and they did it legally. What wasn't legal, but didn't stop them, was to force-place insurance on people who already had insurance in place.
Of course, commissions were paid on the insurance written – sorry, I mean force-fed. Between 570,000 and 800,000 customers were subject to that scheme, based on different sources.
The number of customers screwed over by Wells Fargo is getting pretty high, and we still haven't stopped tallying.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.