The “King of Cross-Sell” and the Race to Eight

An Analysis of Wells Fargo’s Cross-Sell Numbers Since 1998

By Mike Tanglis

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Introduction

“Cross-sell is the result of serving our customers extraordinarily well, understanding their financial needs and goals over their lifetimes, and ensuring we innovate our products, services,and channels so that we earn more of their business and help them succeed financially.”-John G. Stumpf, Chairman and CEO, Wells Fargo, The Vision & Values of Wells Fargo 1

Cross-selling amounts to selling a new product to an existing customer. For example, if a customeronly has a savings account with Wells Fargo, an employee may try to “cross-sell” that customer achecking, credit card, or other type of account.

According to Wells Fargo’s Chairman and CEO, John G. Stumpf, cross-selling “is the result of servingour customers extraordinarily well, understanding their financial needs and goals over their lifetimes, and ensuring we innovate our products, services, and channels so that we earn more oftheir business and help them succeed financially.”2

The Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency (OCC), and the Los Angeles (LA) City Attorney found the exact opposite – fining Wells Fargo $185 million for engaging in fraudulent cross-selling practices. The CFPB described these as “ImproperSales Practices;”3 the OCC described these as “unsafe or unsound practices in the Bank’s risk management and oversight of the Bank’s sales practices;”4 and the Los Angeles City Attorney wrote in its complaint that Wells Fargo imposed “an ambitious and strictly enforced sales quota system” in which “those failing to meet sales quotas are approached by management, and oftenreprimanded and/or told to ‘do whatever it takes’ to meet their individual sales quotas.” The Los Angeles City Attorney also wrote: “Managers constantly hound, berate, demean and threat employees to meet these unreachable quotas.”

By Wells Fargo’s own analysis, as noted in the CFPB consent order, “employees opened 1,534,280deposit accounts that may not have been authorized and that may have been funded through simulated funding, or transferring funds from consumers’ existing accounts without their knowledge or consent.” Employees also “submitted applications for 565,443 credit-card accounts that may not have been authorized by using consumers’ information without their knowledge or consent.” 6

The CFPB’s consent order covers January 1, 2011, to present. As this report shows, Wells Fargo’sproliferation in accounts per customer rose even more markedly from 1998 to 2011 than from 2011 to present. Anecdotal reports suggest that the company was using fraudulent methods prior to 2011 to boost its cross-sell numbers. When asked for comment, the CFPB told Public Citizen “ourinvestigation found that the great majority of unlawful activity occurred from January 1, 2011, topresent.”7 Still, the question remains: How much fraud did Wells Fargo commit prior to the time period for which it was fined by the CFPB earlier this month?

The OCC has ordered Wells Fargo to conduct a review of its sales practices and report the results to the government. When asked for comment, the OCC stated the “order does not specify a timeframefor the enterprise-wide risk review of sales practices required by article IV of our order againstWells Fargo nor does the order specify a specific time period for reimbursements.”8 This indicates that the OCC’s ordered review is not limited to January 1, 2011, to present.