Holy Crap: Wells Fargo Has To Fire 5,300 Employees For Scam Billing

from the how-do-you-miss-that dept

This story is crazy. Late yesterday it was revealed that banking giant Wells Fargo had to fire 5,300 employees over a massive scam in which those employees created over 2 million fake accounts to stuff with fees in order to meet their quarterly numbers. The Consumer Financial Protection Bureau also fined the company $185 million ($100 million to the CFPB, $35 million to the Office of the Comptroller of the Currency and another $50 million to Los Angeles). Oh and it needs to pay back around $5 million to the customers it screwed over. The CFPB provides some crazy details:

Opening deposit accounts and transferring funds without authorization: According to the bank’s own analysis, employees opened roughly 1.5 million deposit accounts that may not have been authorized by consumers. Employees then transferred funds from consumers’ authorized accounts to temporarily fund the new, unauthorized accounts. This widespread practice gave the employees credit for opening the new accounts, allowing them to earn additional compensation and to meet the bank’s sales goals. Consumers, in turn, were sometimes harmed because the bank charged them for insufficient funds or overdraft fees because the money was not in their original accounts.

Applying for credit card accounts without authorization: According to the bank’s own analysis, Wells Fargo employees applied for roughly 565,000 credit card accounts that may not have been authorized by consumers. On those unauthorized credit cards, many consumers incurred annual fees, as well as associated finance or interest charges and other fees.

Issuing and activating debit cards without authorization: Wells Fargo employees requested and issued debit cards without consumers’ knowledge or consent, going so far as to create PINs without telling consumers.

Creating phony email addresses to enroll consumers in online-banking services: Wells Fargo employees created phony email addresses not belonging to consumers to enroll them in online-banking services without their knowledge or consent.

The thing is, if 5,300 employees were a part of this, this was not some random scam. This was a bank-approved plan to goose their numbers. It seems like among the 5,300 employees, management should be in serious trouble as well. What's really astounding about all of this is that it took this long for the practice to come to light. As the CFPB notes, end users were impacted by this, and you'd think that complaints would have made it clear that this was a problem much sooner. Or is that people are just so used to getting screwed by their bank that they let it slide? The CNN report notes that Los Angeles had sued Wells Fargo over this practice last year (hence LA being a part of the settlement fines), but having such a widespread scam going on is somewhat astounding.

And, of course, it raises questions about what other banks are doing similar things as well. We've seen this kind of activity in the telco space at times with cramming, but that was generally third party scammers, where the telcos just looked the other way. This was full-time Wells Fargo employees doing the scam itself, and the bank apparently either encouraging it or just looking the other way from upper management.

Filed Under: banking, billing, cfpb, scam
Companies: wells fargo

Digital Native Government Agency Embraces The Power Of Open Source

from the open-source-for-open-government dept

The Consumer Financial Protection Bureau is a young federal agency (founded in July 2011), and as such has a history of getting it when it comes to the digital world. They launched by taking online suggestions, they run an active blog, and now they've revealed their internal software policy and its dedication to open source, both as a user and a contributor (emphasis in the original):

We agree, and the first section of our source code policy is unequivocal: We use open-source software, and we do so because it helps us fulfill our mission.

Open-source software works because it enables people from around the world to share their contributions with each other. The CFPB has benefited tremendously from other people’s efforts, so it’s only right that we give back to the community by sharing our work with others.

This brings us to the second part of our policy: When we build our own software or contract with a third party to build it for us, we will share the code with the public at no charge. Exceptions will be made when source code exposes sensitive details that would put the Bureau at risk for security breaches; but we believe that, in general, hiding source code does not make the software safer.

We’re sharing our code for a few reasons:

• First, it is the right thing to do: the Bureau will use public dollars to create the source code, so the public should have access to that creation.
• Second, it gives the public a window into how a government agency conducts its business. Our job is to protect consumers and to regulate financial institutions, and every citizen deserves to know exactly how we perform those missions.
• Third, code sharing makes our products better. By letting the development community propose modifications , our software will become more stable, more secure, and more powerful with less time and expense from our team. Sharing our code positions us to maintain a technological pace that would otherwise be impossible for a government agency.

The CFPB is serious about building great technology. This policy will not necessarily make that an easy job, but it will make the goal achievable.

While governments around the world have been moving to embrace open source for a long time, adoption has been pretty slow in the U.S., though it is steadily growing as more federal agencies revise their guidelines and regulations, and some states pass laws requiring the consideration of open source options. But as a new agency that actively pursues the opportunities presented by technology, the CFPB is ahead of the curve. TechCrunch's Scott Merrill got additional details, like the fact that they are trying to lead by example:

I asked Willey what kind of advocacy — if any — the CFPB was doing (or planning to do) for open source software within the government. He shared that they’re using GitHub Enterprise internally, and have fielded a number of questions from other agencies about how they procured that and set it up. “It’s hard for us to have these conversations with other agencies without implicitly advocating an open source philosophy,” Willey told me. “So instead of trying to sell open source to other agencies on principle, we’re finding that it’s a lot easier to prove the value of open source software by showing our colleagues the great results it has gotten us.”

I was curious whether the CFPB’s policy is the natural result of more digital natives taking government jobs. According to Willey, it was “simply the byproduct of building a government organization from scratch in the information age: we are able to craft our technology philosophy with a modern perspective.”

It's good to see people in government placing an emphasis on staying at the forefront of technology, especially in terms of open source. The entire philosophy of open source is perfectly matched to the ideals of a transparent, accountable government that serves and belongs to its citizens, and hopefully the CFPB will lead more agencies in that direction.

Filed Under: cfpb, github, government, open source, software