Wells Fargo agreed to a $72.6 million settlement Monday for overcharging and misleading bank customers about foreign exchange fees from 2010 to 2017.
About half of the settlement ($35.3 million) will be paid directly to the 771 customers affected by the fraud, and approximately $37.3 million will be paid to the United States as civil penalties for violating financial regulations, according to the U.S. Attorney’s Office for the Southern District of New York.
“We all put trust in our banking institutions to deal with us honestly, fairly and transparently when we are their customers. For the better part of a decade, Wells Fargo abused this trust, using tricks, false information and other deceptive practices to fraudulently overcharge customers who used the Bank’s foreign exchange service,” U.S. Attorney Audrey Strauss said in a news release.
How did Wells Fargo overcharge customers?
Wells Fargo offered foreign exchange services to commercial customers, many of which were small and medium-sized businesses. These services included converting foreign currency to U.S. dollars and vice versa.
To make money, Wells Fargo would buy the currency for a cheap price from one party and sell the currency to the other party for a more expensive price. The profit it earned was referred to internally as a “spread” or “sales margin.”
The “spread” it charged was much higher than the rates it cited to customers, and Wells Fargo secretly pocketed tens of millions of dollars.
One tactic was labeled the “Big Figure Trick.” Wells Fargo sales employees would pretend to accidentally switch two digits in transaction prices to charge customers more money. For example, if the price to purchase a euro was $1.0123, a Wells Fargo salesperson would use the big figure trick to switch the price to 1.0213 dollars, according to the Department of Justice.
When customers called them on it, the employees claimed it was a typo, a mistake in entering digits. Wells Fargo sales specialists targeted less financially savvy businesses in the hopes that those customers wouldn’t catch them making these adjustments.
“Wells Fargo created an atmosphere in which employees openly joked about and celebrated taking advantage of the Bank’s customers,” said a news release from the Department of Justice.
Wells Fargo faces fake account penalties: Wells Fargo fined $185M for fake accounts; 5,300 were fired
Wells Fargo faces consequences: Wells Fargo faces shareholders in Des Moines on Tuesday in wake of record $1 billion penalty
How did Wells Fargo mislead customers?
“Wells Fargo FX (foreign exchange) sales specialists used a variety of misrepresentations and deceptive practices to defraud customers,” the SDNY news release recounted. “For example, instead of applying agreed-upon fixed spreads to customers’ outgoing wires, FX sales specialists would charge inflated spreads that were as large as the FX sales specialists thought they could get away with.”
When customers contacted the…
Read More: Wells Fargo settles $72.6 million fraud lawsuit for misleading