Wells Fargo accused of improperly closing fraud victims’ accounts

Rather than investigating the fraud, the bank allegedly just dropped the customers

By Ryan Smith

01 Mar 2018

Another day, another accusation of shady business practices at Wells Fargo. This time, it’s over a novel solution the bank allegedly had for customers who had fraud pop up on their account: Give the customer the boot.

Wells Fargo – which was only overtaken as the nation’s largest mortgage lender in the fourth quarter – has spent much of the past two years embroiled in scandal after scandal. The bank has been dinged for opening millions of customer accounts without authorization, for charging customers for auto insurance they didn’t need, and for charging improper mortgage rate-lock fees. It’s also being sued by both Philadelphia and Sacramento, Calif., for allegedly discriminating against minority mortgage borrowers.

Now the bank is being accused of punishing customers who’ve already been vicitimized by fraud. By law, a bank is required to investigate when signs of fraud appear on a customer account. However, a whistleblower is alleging that rather than do that, Wells Fargo simply closed those accounts and dropped the customers.

Matthew Valles, a former fraud investigator for Wells Fargo, told The New York Times that the bank fired him in retaliation for his complaints that it had mishandled hundreds of fraud investigations. Valles is now suing the bank and his former manager for allegedly violating whistleblower-protection laws.

Valles isn’t the only one making the accusation, according to the Times. Federal regulators have received dozens of complaints about the bank’s fraud investigations.

When a bank receives a claim of fraud or suspicious activity on a customer account, it’s supposed to investigate that claim. If the bank discovers that the customer was an innocent victim, it will usually try to help recover the missing money, according to the Times. If it finds that the customer was engaged in something illegal, the bank is supposed to report its findings to law enforcement and close the account.

But according to the Times, multiple Wells Fargo customers have complained that the bank simply closed or froze their accounts when there were signs of suspicious activity – even if the customers themselves were the ones who brought the fraud to the bank’s attention. The Consumer Financial Protection Bureau has fielded dozens of complaints from customers who suddenly found their accounts closed after they’d been victimized by fraudsters.

Valles’ lawsuit claims that in Wells Fargo’s Portland, Ore., office, it was standard practice to simply shut accounts down rather than investigating potential fraud.

“Improperly closing customer accounts in this manner ensured that customers, not Wells Fargo, were left to absorb the costs of fraudulent activities and unauthorized withdrawals from their checking and savings accounts,” the lawsuit said.

Wells Fargo told the Times it was looking into its fraud-investigation practices. But that doesn’t help people like Michael and Mary Ellen Mervis, a couple who Wells Fargo dropped after they’d been with the bank for decades.

The Mervises discovered in 2015 that one of their accountants had siphoned a six-figure sum from their checking account. The Mervises alerted the bank, and Wells Fargo responded by telling them it was closing their accounts, and that they would not be allowed to open new ones, the Times reported.

“The bank had this attitude that if something went wrong, instead of trying to fix it, they were just going to run you over with the stagecoach and be done with you,” Michael Mervis told the Times.