Well, it’s been a few days, so that must mean it’s time for the latest Wells Fargo scandal.
The nation’s largest mortgage lender, which has been rocked by damaging revelations on a fairly regular basis for the last few months, is now being accused of ripping off mom-and-pop businesses.
According to a lawsuit filed in US District Court, the banking giant has for years overcharged small businesses for processing credit card transactions. Business owners who left Wells Fargo were charged “massive early termination fees,” according to the lawsuit.
The lawsuit, reported by CNNMoney, claimed that the alleged overbilling scheme targeted small – presumably unsophisticated – businesses by using deceptive language in a 63-page contract that was designed to confuse the business owners.
The scandal du jour is focused on Wells Fargo Merchant Services, a joint venture between Wells Fargo and First Data. Wells Fargo owns 60% of the company, according to CNNMoney.
‘Club the baby seals’
A former Wells Fargo Merchant Services employee told CNNMoney that he was specifically instructed to target small businesses.
“We used to be told to go out and club the baby seals: Mom-and-pop shops that had no legal support,” said the employee, who spoke to CNNMoney on the condition of anonymity. According to the employee, once small businesses signed with Wells Fargo Merchant Services, it was nearly impossible to leave.
“God would have had a hard time” escaping the contract, he told CNNMoney. “It really was like a shady used car deal.”
In the lawsuit, veteran-owned company Queen City Tours claimed it was charged a $500 “early termination” fee when it tried to leave Wells Fargo Merchant Services. The company also said that Wells Fargo charged it monthly fees for failing to meet a minimum number of transactions – despite the fact that the contract allegedly claimed there would be no such fees.
Wells Fargo told CNNMoney that it denied the claims made in the lawsuit and intended to defend against it.
Chairman in danger
The company can’t seem to get through a lunch break without a scandal lately. Its woes began last year when it was revealed that Wells Fargo employees had opened millions of customer accounts without those customers’ knowledge or consent. Since then, the bank has been embroiled in scandals regarding mortgage modifications and auto insurance.
The insurance scandal, in which it was revealed that half a million customers may have unwittingly paid for unnecessary auto insurance while making their monthly loan payments, may be forcing a leadership shakeup at the bank. The Wall Street Journal reported that Wells Fargo Chairman Stephen Sanger will likely step down before the bank’s next shareholder meeting early next year. If that happens, Sanger will most likely be succeeded by Vice Chair Elizabeth Duke.
It wouldn’t be the first time a scandal has cost the beleaguered lender a key member of its leadership. CEO John Stumpf was forced to resign in the wake of last year’s fake-accounts scandal. He was replaced by Tim Sloan.
Wells Fargo settles lawsuit but CEO warns “more headlines” expected
Wells Fargo in yet another scandal