Chicago, Illinois — In early September, 2016, the Consumer Financial Protection Bureau charged Wells Fargo & Company bank of opening more than 2 million accounts that consumers may not have known about. As a result, the firm has been required to pay $185 million in fines and to compensate customers who incurred unfair fees or charges.
Now, in the wake of this scandal, the winds in the “Windy City” of Chicago are blowing against the bank. On October 5, 2016, the Chicago City Council passed a unanimous resolution to block Wells Fargo from doing business in its city for one year.
In so doing the city joins the states of Illinois and California, as well as other governments that have passed sanctions against Wells Fargo.
Chicago alderman Edward Burke, a member of the City Council, spoke of his intention and the Council’s to send a message to the bank that Chicago will not put up with “this kind of conduct.”
Meanwhile, Chicago City Treasurer Kurt Summers has said that he will divest the $25 million that Chicago has invested with Wells Fargo. He also noted that his office intends to stop investing in the bank’s debt securities for a year.
The city’s actions follow upon similar sanctions by the state.
On October 3 Illinois State Treasurer Michael Frerichs announced that the bank would no longer be a broker and dealer for the state for approximately $30 billion in annual state investments. Frerichs added that this will cost Wells Fargo as much as “tens of millions” of dollars in fees during the one-year moratorium.
Wells Fargo has been a banking and investment partner of the city of Chicago and the state of Illinois for nearly 50 years.
As Treasurer, Frerichs oversees the state’s annual investments, which are valued at approximately $1 trillion per year. The office of the Illinois State Treasurer works with roughly 25 investment companies, of which Wells Fargo is one. The state contracts with these firms to make various short-term investments for Illinois.
“Wells Fargo took advantage of consumers by secretly opening 2 million unauthorized deposit, credit card, debit card, and online banking accounts.”
Wells Fargo allegedly engaged in these activities for years as a way to meet inflated sales goals. The practices cost the bank’s customers millions in unfair fees and resulted in damaged credit scores for many consumers.
Frerichs stated that he believes these unfair actions by the banking firm merit a “strong response.”
The company has admitted that in the state of Illinois alone, it’s possible that nearly 5,000 unauthorized accounts were opened for customers. Wells Fargo spokeswoman Bridget Braxton has admitted the following: “Although it was not confirmed that these accounts were unauthorized, 233 incurred fees.” The bank has “decided to err on the side of the customer,” she added, by issuing an average fee refund of $25 per account.
LaTrina Shepherd, another Wells Fargo spokesperson, conceded,
“We’re very sorry and take full responsibility for the incidents in our retail bank.”
The bank has agreed to take prompt actions to resolve the issues in the allegations.