Why is Wells Fargo shutting down all of its existing personal lines of credit?
Wells Fargo received backlash after customers found out that the bank would be ending all personal lines of credit within the next two months.
Wells Fargo, one of the largest banks in the US, faced backlash by consumers and policymakers this week over their move to “close down all existing personal lines of credit in coming weeks and has stopped offering the product,” CNBC reports.
This news comes as the financial giant tries to rebuild its image after a major account scandal rocked the organization in 2016. The bank was found to have been pressuring branch workers to open more accounts, leading to over 3.5 million fake accounts between 2002 and 2017.
Once the lawsuit was settled, the US Federal Reserve restricted how the bank could manage financial assets until they showed that their practices have been improved and were in compliance with the law.
In simple terms, this means that the federal government places a cap on the number of loans, securities, and other financial assets the bank could take on. CNBC has reported that these caps have made it difficult for the bank to compete with rivals in the sector, including JP Morgan Chase and Bank of America.
How were members notified of the change?
The personal lines of credit that will be discontinued ranged in value from anywhere between $3,000 to $100,000. Last year, Wells Fargo also stopped issuing a few other lines of credits, including those for home equity and some of the auto loans offered.
In a statement offered to CNBC, the bank said that cutting these lines of credit was done “In an effort to simplify our product offerings," and that by eliminating these loans, the bank will can "better meet the borrowing needs of our customers through credit card and personal loan products.”
However, on the Wells Fargo website, the page offering these loans is still active even though a letter abstained by CNBC stated that all accounts would be closed within the next sixty days.
The letter contained a Frequently Asked Questions section that warned holders of the loan that their credit score could be impacted. In response, Senator Elizabeth Warren tweeted, “Not a single @WellsFargo customer should see their credit score suffer just because their bank is restructuring after years of scams and incompetence.”
Not a single @WellsFargo customer should see their credit score suffer just because their bank is restructuring after years of scams and incompetence. Sending out a warning notice simply isn’t good enough – Wells Fargo needs to make this right. https://t.co/wyuuY2WEk5— Elizabeth Warren (@SenWarren) July 8, 2021
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