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This One's About Wells Fargo
And, well, other big banks
On the heels of an announcement by the Consumer Financial Protection Bureau (CFPB) that Wells Fargo is being fined $3.7 billion for harms to consumers caused by the banks illegal and deceptive practices, consumer advocates applauded the move and called for even more penalties for the banking giant.
Wells Fargo will pay $2 billion in refunds to consumers and an additional $1.7 billion fine after the CFPB found the bank’s practices harmed 16 million consumers.
In response to the news, Revolving Door Project Executive Director Jeff Hauser said:
“By returning $2 billion to defrauded customers’ pockets, CFPB Director Rohit Chopra continues to be the model whom all other regulators should aspire to resemble.”
Hauser added that while today’s action against Wells Fargo is welcome news, other agencies need to step up and rein-in the bank.
“The problem is that the CFPB cannot, by itself, solve what’s wrong at Wells Fargo. Chopra is genuinely doing all that he can, but other agencies, which have the proper tools to restrict and restructure the business itself, need to step up and find some of his fearlessness.”
Accountable.US also had positive words for the enforcement action by CFPB.
“Once again, Wells Fargo messed around with consumers’ hard-earned money and found out that behavior will not stand from the CFPB,” said Liz Zelnick, Director of the Economic Security and Corporate Power program at Accountable.US.
Zelnick noted that Wells Fargo has funded legal action against the CFPB in order to prevent just this sort of enforcement action.
“Wells Fargo has contributed to a long-running, organized effort by greedy industries and politicians in their pocket to defang, defund or do away with the CFPB because it works so well to protect consumers from schemes, scams and predatory behavior,” Zelnick said.
Customers Lose Big by Saving at Big Banks
A recent story in the Wall Street Journal reminded me that Americans have an uneasy relationship with Big Banks.
The five largest banks — Bank of America, Citigroup, JPMorgan Chase, US Bank, and Wells Fargo — control roughly half of all money in deposit accounts in U.S. banks.
It seems sensible. These banks are everywhere — there are branches around the country. This also means a network of ATMs — which means less fees to pay for accessing your money.
Essentially, the convenience and familiarity lead to significant deposits from consumers and huge profits for these large banks.
The WSJ story noted that banking with the familiar and convenient big banks comes at a big cost — $42 billion in lost income in the third quarter of 2022 alone.
In theory, savers could have earned $42 billion more in interest in the third quarter if they moved their money out of the five largest U.S. banks by deposits to the five highest-yield savings accounts — none of which are offered by the big banks — according to a Wall Street Journal analysis of S&P Global Market Intelligence data.
The story went on to note that the gap between the savings rates at big banks and smaller banks and alternative financial institutions in terms of savings rate is at an all-time high.
That is, consumers are losing more now than ever by not moving their money.