Wells Fargo · 2016 · Banking
Wells Fargo and the Fake Accounts
Under intense pressure to sell more products, Wells Fargo employees opened millions of bank and credit card accounts that customers never asked for. Regulators fined the bank in 2016, and in 2020 it paid $3 billion and admitted wrongdoing, showing how a sales culture can turn against the very customers it is supposed to serve.
When the goal matters more than the customer, the goal will eat the customer.
The story
For years, Wells Fargo was admired as one of the best-run banks in America. A big part of its strategy was "cross-selling," which means selling more products to the customers you already have. If you had a checking account, the bank wanted you to have a savings account, a credit card, a debit card and online bill pay too. Each extra product meant more fees and a closer relationship.
The bank set tough sales goals for branch employees, and many workers felt they could not meet them honestly. Regulators later said that, starting at least in 2011, employees opened accounts customers had not authorized in order to hit sales targets and earn bonuses. Some moved customers' money into new accounts without asking. Others signed customers up for credit cards they never applied for. Customers sometimes discovered the problem only when they were charged overdraft fees, annual fees or interest on accounts they did not know existed. Some saw their credit scores harmed.
Warnings had been building. In May 2015, the Los Angeles City Attorney sued Wells Fargo over these practices, and the bank began a deeper review. On September 8, 2016, the Consumer Financial Protection Bureau (CFPB), a federal agency that protects consumers in money matters, announced the results. A consulting firm's analysis found about 1.5 million deposit accounts that may not have been authorized, and employees had applied for 565,443 credit cards without customers' consent. Wells Fargo agreed to pay $185 million in penalties to the CFPB, another bank regulator, and the City and County of Los Angeles, plus refunds to customers. The bank said it had fired about 5,300 employees over several years for this behavior.
Many people were angry that low-paid branch workers were fired while the leaders who set the targets kept their jobs and pay. Chief executive John Stumpf faced harsh questions in Congress and stepped down in October 2016. A wider review in 2017 raised the count of potentially fake accounts to about 3.5 million. In February 2018, the Federal Reserve took the unusual step of capping how large Wells Fargo could grow, at about $1.95 trillion in assets, until it fixed its problems. No big bank had faced a limit like that before.
In February 2020, Wells Fargo agreed to pay $3 billion to settle criminal and civil investigations by the Justice Department and the SEC. As part of the deal, the bank admitted that it had collected fees and interest it should not have, harmed customers' credit ratings and misused their personal information. The top federal prosecutor in Los Angeles said Wells Fargo had "traded its hard-earned reputation for short-term profits." Stumpf was barred from banking and paid $17.5 million to a regulator. Carrie Tolstedt, who had led the branch banking division, pleaded guilty to obstructing a bank examination, for helping prepare a 2015 memo to regulators that left out how many employees had been fired or had quit amid sales-misconduct reviews. In 2023 she was sentenced to probation and home confinement and a $100,000 fine.
The asset cap stayed in place for more than seven years. The Federal Reserve finally lifted it in June 2025. For families who run businesses, the story is a sharp warning. Goals are useful, but if the only thing you measure is how much you sell, people will find ways to make the number look good even when the customer loses.
Lessons learned
- Watch how goals get met. A target that can only be hit by cutting corners will produce cut corners.
- Measure what customers value. Count happy, returning customers, not just products sold.
- Leaders own the culture. Blaming front-line workers for a system the leaders built rarely satisfies anyone.
- Tell regulators the whole truth. Tolstedt's crime was hiding information, not just the sales practices themselves.
Talk about it
- Why might an honest employee open a fake account? What would you do if your job depended on meeting an impossible goal?
- Was it fair that thousands of branch workers were fired? Who else should have been held responsible?
- If you ran a small business, what goals would you set for your workers, and how would you check that they were met honestly?
Worth knowing
Account counts changed as investigations went on: about 2 million accounts in 2016, rising to about 3.5 million in a 2017 review. Tolstedt was the only Wells Fargo executive criminally charged; the judge noted that at sentencing. The bank's 2020 admissions were part of a deferred prosecution agreement, meaning it avoided criminal charges by meeting its terms.
Sources
- KSL / Associated Press, '5,300 Wells Fargo employees fired over 2M phony accounts' (2016)
- CNBC, 'Wells Fargo to pay $3 billion to settle criminal and civil investigations' (2020)
- Banking Dive, 'Ex-Wells Fargo executive Tolstedt avoids prison' (2023)
- Associated Press via KSAT, 'Fed lifts restrictions placed on Wells Fargo in 2018' (2025)
Written for this site from the sources above. A summary for learning, not legal or financial advice.