Wells Fargo is in the spotlight now after its employees allegedly opened up to 2 million bank and credit card accounts, transferred customers’ money without telling them and even created fake email addresses to sign people up for online banking in an effort to meet lofty sales goals.
The change in focus for retail banks had been taking place slowly for years, but the financial crisis that began in 2007 and the impact on banks fueled faster change. The Federal Reserve’s cutting interest rates to nearly zero gave the economy a boost during the Great Recession, but it also eviscerated the banks’ ability to earn interest income, spurring them to seek new forms of revenue, often from fees.
And the more products a customer has, the more potential there is for a bank to earn fees. Those could be the overdraft fees at a checking account or management fees of a retiree’s nest egg. Another benefit for the industry is that having several products with a bank makes it more difficult for customers to leave and switch to a new one, said Bob Hedges, a banking industry consultant with A.T. Kearney.
Ruth Landaverde, a former worker at both Wells Fargo and Bank of America (BofA), said the pressure was intense at Wells and at BofA. She had to sell four credit cards and four auto loans each week, as well as three home mortgages. She said the quotas were simply to keep her job, not for substantial commission or bonus. “The sales pressure was real,” she said. “I can see why some employees did what they did.”