Despite the fact that the card business is a $10 trillion global enterprise, it is relatively straight forward. In the four party network, a franchise dominated by MasterCard and Visa, you balance the books all the way through and you enable commerce between buyers and sellers. There are some guidelines along the way for transparency and fair lending, but it is take for granted that you don’t lie, cheat or steal.
Today’s news is dominated by a shameful incident at Wells Fargo that cost 5,200 jobs; it hits on an issue so basic that you’d expect to read about it in Robert Fulghum’s “All I Really Need to Know I Learned in Kindergarten” .
Despite the fear in the eyes of most bankers when the Consumer Financial Protection Bureau formed after the Great Recession, the recent enforcement of this issue is a good example of rapid response and the maintenance of confidence in our banking system. Wells is liable for $185 million in civil penalties, and must now open up their operational and lending processes to ensure this is the end of a very ugly, unofficial strategy.
The Wells card portfolio is unique. It includes the legacy portfolio build primarily from cross sells by branch staff, as well as a large block of accounts sourced from their acquisition of First Union and Wachovia, which unto themselves were clusters of bank acquisitions in the 1990s, Norwest is another large portfolio that gave the issuer national presence and moved the operation of Wells Fargo Bank, NA to the thriving metropolis of Sioux Falls, SD.
Wells will recover from the incident but this is certainly another notice to bankers: this is not the gentile world of High Street, but you simply can’t lie, cheat or steal and get away with it.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
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