Note to Wells Fargo: Repetition is not Good for Crises

The data from research studies clearly indicate a history of crises is problematic for an organization.  Multiple crises increase attributions for crisis responsibility (and attendant damage to the organization) because it indicates stability for crisis inducing behavior.  This is part of what has been called the Velcro effect because past crises attract negative views just as Velcro attracts fuzz.


Wells Fargo cannot seem to avoid taking actions they know can hurt their customers.  I must disclose Wells Fargo owns our home mortgage but it was sold to them and we had no choice in the matter.  Last year it was found Wells Fargo employees created extra accounts for over 2 million customers without their knowledge.  Over 5,000 employees were fired after that crisis/scandal.  This July Wells Fargo admitted it had charged people with automobile loans for insurance they did not need.  The improper insurance was charged to around 800,000 people.  About 274,000 of those customers were forced into delinquency with 20,000 to 25,000 having vehicles repossessed.  In addition to the financial damage, Wells Fargo has hurt their customers in many other ways including their credit scores and access to vehicles.


To make matters worse, Wells Fargo was aware of the problem since July of 2016.  The company had the consulting firm of Oliver Wyman investigate the situation.  The New York Times made the story public when if published a story based upon the internal report.  Wells Fargo clearly missed the chance to use stealing thunder on this crisis by not disclosing what it knew when it knew it.


Once the crisis/scandal was public, Wells Fargo began posting messages online including its webs site and on Twitter.  Here is the text from the response:


Wells Fargo CEO Tim Sloan shared his thoughts with team members about making things right for auto insurance customers.

July 28, 2017

Editor’s note: On July 27, CEO Tim Sloan sent the following companywide message.

On July 27 Wells Fargo made an important public announcement about the steps we are making to build a better auto lending business and to address efforts we are taking to make things right for some customers in regard to our vehicle Collateral Protection Insurance (CPI) Program.

In addition, The New York Times has published an article based on a preliminary report that we commissioned several months ago to help us ensure that we make impacted customers whole.

Customers’ auto loan contracts require them to maintain comprehensive and collision physical damage insurance on behalf of the lender throughout the term of the loan. As permitted under those contracts, Wells Fargo would purchase CPI from a vendor on the customer’s behalf if there was no evidence — either from the customer or the insurance company — that the customer already had the required insurance.

However, in July 2016 we initiated a review of the CPI program in response to customer concerns and determined that certain external vendor processes and internal controls were inadequate. More important, we discovered that those deficiencies inadvertently harmed some of our customers. We discontinued the program in September 2016 and immediately started work, with the help of independent consultants, to ensure that our remediation plan addresses customer situations in a thoughtful way.

Wells Fargo reviewed policies placed between 2012 and 2017 and identified approximately 570,000 customers who may have been impacted and will receive refunds and other payments as compensation. In total, approximately $64 million in cash remediation will be sent to customers in the coming months, along with $16 million in account adjustments, for a total of approximately $80 million in remediation. In some cases we already have refunded customers, and the remainder of the remediation program — which begins in August and concludes by the end of this year — is still being finalized.

Beyond this remediation, we’ve taken multiple steps to strengthen the Dealer Services business. Just this week, Dealer Services announced a new structure and other recent changes include centralizing collections, tightening our credit standards, increasing oversight of third-party vendors, enhancing our risk management practices, and hiring new leaders and team members.

Auto lending is an important business to Wells Fargo because it’s vital for our customers to have access to affordable vehicle financing that enables their everyday lives. Today’s announcement underscores our long-term commitment to the business and to conducting it in the right way.

We are deeply sorry for any harm we caused our customers, who expect and deserve better from us. Situations like this one reinforce the importance of continuing to examine every aspect of our business. We will acknowledge mistakes and take responsibility for our actions. On those days, I appreciate that it sometimes can be challenging to keep up the tremendous effort you make each day for our customers and for our company. I believe in the work you are doing. I believe it’s making a significant difference and that a brighter future lies ahead for all of us as we build a better, stronger Wells Fargo.

Thank you.

Questions to Consider


  1. How effective do you feel the Wells Fargo response will be for current customers? For potential customers?


  1. How important is compensation for this crisis? Why?


  1. How important is an apology in this crisis? Why?


  1. How badly will knowing Wells Fargo withheld information hurt efforts to repair the damage from the crisis?


  1. What role does the past crisis/scandal play in shaping this crisis/scandal?



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s