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.