Wells Fargo shenanigans robbed consumers, but there’s a better way

Last week, the Consumer Financial Protection Bureau slapped Wells Fargo Bank with a $100 million fine for illegally opening credit card and deposit accounts for customers and then assessing millions of dollars in fees against these accounts. This is the largest fine ever imposed by the federal watchdog charged with protecting consumers’ rights.

According to the CFPB, Wells Fargo employees opened 1.5 million fraudulent accounts and 565,000 credit cards without the consent of customers in an effort to meet aggressive sales goals. This massive fine highlights the unprecedented nature of this bad conduct, which breached the trust of hundreds of thousands of their account holders. The bank’s employees were moving funds from members’ existing accounts into new accounts, resulting in unauthorized fees that account holders were left to pay.

Unfortunately, this is the latest in a long series of instances of illegal, unethical and downright scandalous behavior by huge Wall Street banks. It’s obvious that these massive national banks continue to care more about short-term profits than the working families they are supposed to serve. Bad conduct like this by Wall Street banks earned oversight from the CFPB, which was created to be a watchdog over big-bank market practices in the aftermath of the financial crisis, which was largely a result of the housing bubble – fueled by big-bank greed.

While consumers may feel disheartened by the unethical conduct of mega-banks, there is an alternative to the profit-driven model that is specifically designed to give working families access to high-quality, low-cost financial services – credit unions.

Unlike large banks, credit unions are not-for-profit, member-owned financial institutions. Because credit unions are owned by their members, they exist to serve their members and they work hard to improve the financial condition of members and strengthen the local communities across Michigan. According to a 2015 study conducted by the Michigan Credit Union League of close to 2,000 Michigan residents, 59 percent of credit union members “trust entirely” that their credit union is operating in the member’s best interest. This is compared to just 31 percent of bank customers.

Other studies mirror these results. In 2011, the American Customer Satisfaction Index reported unprecedented credit union consumer satisfaction, and in 2014, credit unions received the second-highest satisfaction score of all 43 industries, significantly beating banks, according to the Credit Union National Association.

Michigan consumers are increasingly making the choice to take advantage of the financial services available through credit unions. According to 2016 second-quarter data provided by the National Credit Union Administration, Michigan is closing in on the 5 million membership mark. This equates to nearly half of the state’s population, and marks the fastest growing increase in years.

Credit union growth is more than a passing trend, and is partially due to the realization that credit unions don't have a profit motive driving their relationship with their members. Rather than focusing on driving profit, credit unions are focusing on consumer education, high quality, lower cost financial products and strengthening the financial resiliency of their members.

Credit unions have also made youth financial literacy a priority. According to the National Youth Involvement Board, Michigan credit unions were able to reach more than 55,000 students in the past year through education presentations. Not only do we want to help current members, but we want Michigan’s future to be well equipped with the financial management skills necessary to succeed.

While the fine levied on Wells Fargo is unprecedented for the CFPB, it should be noted that it’s hardly a dent for a bank as big as Wells Fargo. Hopefully the threat of large fines will serve as an effective deterrent to bad conduct like this this in the future.

In the meantime, while Wells Fargo employees were opening accounts without their customers' permission, over 40,000 Michiganders joined a credit union during the second quarter of 2016 alone, because they know they can trust credit unions to look out for their financial well-being.

Click here to learn more about credit unions and/or to find a nearby office.

Bridge welcomes guest columns from a diverse range of people on issues relating to Michigan and its future. The views and assertions of these writers do not necessarily reflect those of Bridge or The Center for Michigan.

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Comments

Barry Visel
Sun, 09/25/2016 - 8:43am
Fact check: Wells Fargo is headquartered in San Francisco, not Walk Street New York. Fact check: A big part of the housing bubble was caused by Congress requiring banks to make housing loans that didn't meet normal banking practices. What Wells Fargo employees did was wrong, but I can't believe the number of consumers that don't monitor their accounts.
Charlene S
Sun, 09/25/2016 - 10:05am
We've been banking with a hometown credit union since 1976. I've lost track of the number of times being able to walk into the office and talk face-to-face with a staff person has solved a day-to-day banking technical issue for us.
Sun, 09/25/2016 - 10:47am
There is this issue with credit unions, however. Credit union income is tax-exempt, so credit unions get a $2.4 billion subsidy from the federal government in the form of a "tax expenditure."
Thu, 09/29/2016 - 3:14pm
To my knowledge, bankers are the only ones complaining about credit unions' tax exempt status. It is the very reason that they are "not-for-profit" cooperatives. Good public policy drives good outcomes. More affordable financial services choices for consumers and small businesses. If banks want to have favorable tax treatment, they can convert to the credit union charter. The tradeoff is that no executive or board member would own stock or have stock awards. And they would be unable to raise capital in the equity and bond markets like banks do now. Different charters have different privileges. But bankers shouldn't complain about the tax exemptions given to credit unions, churches, charities, foundations and nonprofit hospitals unless they want to operate like one of those charters and give up the compensation and capital raising capabilities of their bank charters.
Dave
Sun, 09/25/2016 - 8:01pm
As one who uses both a bank and a credit union, the bank seems to be lower cost and more efficient. Online bill payment, bank free, credit union $3.00 per month. Credit union paper statement fee, bank no fee. Credit union's seem to be merging, and building large beautiful new offices, which banks already have. Credit unions used to be better, but now appear to be taking a cue from mutual insurance companies which are frequently more expensive than for profit insurance companies and with service that is no better. Mutual insurance companies "are operated for the benefit of their members" but pay management very well, have nicer offices, pay less taxes, and save their members nothing on a consistent basis. The member benefit part is a joke, credit unions are headed the same way.
Dan Sibo
Tue, 09/27/2016 - 12:26pm
Agreed. And once you start checking into what the heads of some CU are paid, they indeed seem to be following the banks.
First time caller
Tue, 09/27/2016 - 3:22pm
Comparing Credit Union executive salaries to their banking counterparts is laughable. Show me the Credit Union employee that has comparable income to the names on this list below? Goldman has dozens of employees making tens of millions of dollars. Many Credit Unions have less than that in total assets. The mergers and changes mentioned above are necessary to close efficiency gaps and attract/retain higher talent. Regulation is driving this evolution, and your critiques should be redirected to your legislators if you truly want financial cooperatives to return to their earlier days. That being said, growth is not necessarily a bad thing, and there's plenty examples of large, successful, member benefiting credit unions across the country. http://money.cnn.com/news/specials/storysupplement/ceopay/
masterP
Thu, 10/20/2016 - 2:55pm
Your example is unfair. You're link lists the compensation of the CEO's of the largest banks in the United States and in some cases, the world. If you look at peer group rankings I would suspect you'll find that that Credit Union executive salaries are on par with comparable sized banks. That is if you could do a comparison. Most banks are publicly traded and have to disclose this information but credit unions are not so information is disclosed only if they choose to. Having worked in both industries, banking and credit unions, there's been so much movement between the two that they're virtually indistinguishable from each other.
openminds1
Fri, 09/30/2016 - 4:37pm
My bank offers free checking for those over 60, no fees. My credit union charges for checks and charges if I make more than 3 ATM withdrawals per month. Why should a credit union charge me for withdrawing my own funds?