When I first heard the news that Wells Fargo employees fraudulently opened two million unauthorized or fictitious customer accounts in an effort to meet sales goals, I could hardly believe that such a fraud could occur. Then as I learned that this happened over a period of several years, dating back to at least 2011 and that Wells Fargo continued to pressure employees to “cross-sell” (i.e. open new accounts), even after they became aware of these egregious acts, I was outraged.
At the Senate Banking Committee hearing this week, The Wall Street Journal reported that Senators “accused [Wells Fargo CEO] John Stumpf of fostering a culture where low-paid branch employees were pressured to meet impossible sales quotas to keep their jobs, and so signed up customers for products without their knowledge. As the employees sold more products, Wells Fargo shares rose and bigger bonuses flowed in for the top executives.”
How could this happen? In a well written article on “How Wells Fargo’s High Pressure Sales Culture Spiraled Out Of Control” the WSJ summarized it this way: “Hourly targets, fear of being fired and attractive bonuses kept employees ‘selling’ even when the bank began cracking down on abuses.” The article went on to say: “For five years, Wells Fargo conducted investigations into improper practices, hired consultants and tinkered with sales and compensation incentives. Questionable sales tactics persisted, though, and were an open secret in Wells Fargo branches across the country … branch managers routinely monitored employees’ progress toward meeting sales goals, sometimes hourly, and sales numbers at the branch level were reported to higher-ranking managers as many as seven times a day. Tension about how to meet the sales targets was common. Former employees reported that managers asked employees who had fallen short of the targets if they could open accounts for their mother, siblings or friends.”
“In May 2015, the Los Angeles city attorney’s office alleged in a lawsuit that Wells Fargo pressured retail employees to commit fraud. The allegations included opening accounts for people who didn’t exist and charging customers for products without permission. Los Angeles City Attorney Michael Feuer says it was a Los Angeles Times story about the unauthorized accounts in December 2013 that triggered his investigation—years after the bank started firing people for misconduct.”
Now that Wells Fargo has agreed to pay $185 million to settle charges with the City of Los Angeles, the OCC and CFPB, and fired 5,300 employees, it is apparent this is a significant leadership failure.
And it was only last week, after bad publicity stemming from Wells Fargo’s settlement with government agencies, that the bank announced it will finally end all product sales goals in its retail banks.
Clearly the culture at Wells Fargo was out of control, and needs to change, soon.
Fortunately, member owned credit unions have a very different culture. One that is member focused, and puts the members’ need first, not earning sales incentives for pushing customers into products they don’t need, or in the case of Wells Fargo, creating accounts and in some cases transferring funds without their customers’ consent.
The good news is this is a very good time for credit unions to point out the wonderful differences between member owned credit unions and the profit driven banks. Banks focus on transactions and profit, whereas credit unions focus on members and relationships.
In Raleigh, NC this week, SECU issued a statement noting that while many financial service providers utilize incentive based payment systems and commission structures to pay their employees that lead to pressures to act unethically, credit unions have a not-for-profit financial cooperative model, where members share the benefits of SECU ownership.
“Credit Union employees are paid a salary only, there are no incentive or commission-based compensation programs,” the credit union said. “This structure intentionally removes any temptation which might distract the focus of providing members the most appropriate products, allowing staff to fully focus on helping members improve their financial lives.”
“State Employees’ Credit Union is the trusted services provider for more than two-million members,” said SECU President Mike Lord in a statement. “Our ‘Do the Right Thing’ mission continues to guide our employees to serve our members. We purposely operate with no commissions or incentive pay so that employees focus on the best choices for members. The only incentive our employees have is to help members by providing the best product or service that meets their needs and the needs of their family.”
This is the right approach, and the right time to make such statements to your members. Reassure existing members and help potential members know you do not use high pressure sales quotas and incentives to push members into products to help you meet sales goals … you are member focused, doing what is right for your members. Use social media to get the message out. Tap into the universal anger at Wells Fargo’s reprehensible culture and behavior and show the world that you are different … you are better … you can be trusted, because you do not operate in a for-profit culture, your focus on your members.
One last thought on doing the right thing. I was fortunate enough to work at USAA for nearly 11 years, in leadership positions at USAA’s bank. Every employee knew the #1 priority at USAA was member service. We lived it and breathed it every day. We instilled it into new employees, where their first week was spent learning the USAA Culture and unlearning what many had learned working at profit-driven banks before joining us. The results were tremendous, with over 95% of members saying they would stay with USAA for life. That is what mutual trust and respect does in building relationships. That is what we are all about in the credit union world.
