Give Wells Fargo this much credit: The bank keeps coming up with ingenious ways to screw over customers.
In recent years we’ve seen Wells sign up millions of people for accounts they didn’t want, improperly repossess the cars of service members and charge customers for insurance they didn’t ask for, resulting in billions of dollars in fines.
Now there’s this.
Rick Yelinek, 68, finally amassed enough money to pay off the mortgage on his Eagle Rock home. He stopped by a Wells Fargo branch in Glendale with a cashier’s check and deposited it into the checking account used for his Wells Fargo home loan.
First Yelinek was told he’d have to wait a few days for the check to clear, which he was expecting, even though it meant Wells would be able to add more interest to his loan, which it did.
After the check cleared, though, is when the bank lived up to its reputation for customer unfriendliness.
Yelinek was informed that he’d have to shell out an extra $30 for a wire transfer to move his mortgage payment from one division of the bank to another.
“I was incredulous,” he told me. “I couldn’t believe what they were saying.”
Yelinek pointed out to the Wells staffer handling his account that he’d been a customer in good standing for many years and asked that the $30 fee be waived.
“They said they never waive wire transfer fees,” he recalled.
Yelinek subsequently lodged a complaint with the bank over his treatment. That was in August. “I’m still waiting for a response,” he said this week.
The episode is remarkable on numerous levels, not least that if any bank needs to do some reputational damage control by treating people fairly, it’s Wells Fargo.
Then there’s this: Yelinek is a 35-year veteran of the banking industry, including seven years at Wells Fargo as a loan officer. It’s fair to say he knows the business.
And he’s unimpressed by his former employer’s behavior.
“This is typical Wells Fargo,” Yelinek said. “The bank is so fee-based, they’ll do anything to get money from customers.”
Wells may be particularly focused on fees, but it’s by no means alone.
Since deregulation in the 1980s, the entire banking industry has grown more reliant on reaching into people’s pockets with nickel-and-dime fees, as opposed to its traditional focus on loan interest.
We’re talking overdraft fees, wire transfer fees, credit card fees, insufficient funds fees, ATM fees and other charges that over the years have played an increasingly important role in keeping profit-hungry bank shareholders happy.
The Federal Reserve Bank of Cleveland found in a 2019 study that banks’ so-called noninterest income jumped by 25% from 2005 to 2018.
The banking industry as a whole took in $12.4 billion from overdraft fees alone last year, the vast majority of which were paid by lower-income people.
So Wells Fargo isn’t the only one muscling its customers. But its status as the country’s largest residential mortgage servicer gives it ample opportunity to exploit this captive market.
In the nine months that ended Sept. 30, Wells pocketed almost $4 billion in mortgage banking noninterest income, including $2.1 billion in “servicing fees, late charges and ancillary fees.”
This presumably includes those $30 wire transfer charges that infuriated Yelinek.
Wells is currently servicing about 6.5 million mortgage loans.
“I wonder how many $30 fees they get for payoffs of those mortgages,” Yelinek said, echoing my own thoughts.
And that’s the key issue in any discussion of fee-based businesses. The outrage isn’t just in individual fees, although they’re sufficiently galling to most consumers.
The true outrage is in the volume of fees. Thirty dollars here, $30 there. Pretty soon you’re looking at serious money.
Other banks may also charge fees for internal fund transfers, but I couldn’t find one of Wells’ stature that does so for mortgage payoffs. Bank of America doesn’t do it. Nor does U.S. Bank.
“We’d accomplish it without the need for a wire transfer at all,” said Evan Lapiska, a U.S. Bank spokesperson.
Tom Goyda, a Wells Fargo spokesperson, said the bank regretted not responding to Yelinek when he first raised these issues in August. “We are reaching out to him and plan to refund the wire transfer fee,” he said.
So Wells does waive wire transfer fees, it turns out.
Yet the bank didn’t seem regretful about inflicting the same fee on possibly millions of other mortgage customers (Goyda was unable to provide a specific number).
“We clearly communicate options for sending payoff funds,” he told me. “These options are laid out in the written payoff letter and include the option of paying by certified check to avoid a wire transfer fee.”
Wait, customers could avoid the wire transfer fee if they used a certified check but not if they used a cashier’s check? That makes little sense.
The only difference between cashier’s checks and certified checks is that the former are drawn from the bank’s own account, whereas the latter are drawn from the customer’s account. In both cases, the issuing bank verifies upfront that sufficient funds exist.
Goyda said certified checks are made out to Wells Fargo, but a cashier’s check may be made out to the mortgage account holder.
That’s a distinction without a difference. With both types of pre-verified checks, the money was being deposited at Wells Fargo for the express purpose of paying off a Wells mortgage.
Most banks charge fees for making wire transfers to other banks, and some charge for receiving them.
As such, Goyda said Wells’ $30 fee for mortgage payoffs was justified even though, as in Yelinek’s case, the bank was both initiating and receiving the wire transfer as it shifted funds from one part of the company to another.
That, of course, is silly. Wells was basically arguing that if a cashier’s check is used (but not a certified check), it has the right to charge $30 even if it’s transferring funds from itself to itself.
Goyda offered no response when I pointed this out. He did say, though, that the bank was “reviewing our processes for such transactions” as a result of my inquiries.
And guess what?
Goyda contacted me Thursday afternoon to say Wells had a sudden change of heart.
“We recognize why Mr. Yelinek and others in his situation would be unhappy about paying a fee in these circumstances,” he said.
“We are changing our process so in the future customers won’t be charged this type of fee when transferring funds from a Wells Fargo deposit account to pay off a Wells Fargo mortgage.”
That’s commendable. I still wonder, though, about all the money Wells Fargo has already raked in from this practice over the years.
If I were a banking regulator, I’d be wondering the same. And I’d be wondering if some restitution is in order.