In what appears to be a very blatant restructuring attempt on Wells Fargo’s end, they have decided bascially overnight to shut down their popular consumer lending product, ending all existing personal lines of credit in the coming weeks for its customers. Naturally customers are very upset, not only will this negatively affect their credit scores but the repayment terms are unclear as well for existing customers.
The revolving credit lines, which typically let users borrow between $3,000 to $100,000, were pitched as a way to consolidate higher-interest credit card debt, pay for home renovations or avoid overdraft fees on linked checking accounts.
“Wells Fargo recently reviewed its product offerings and decided to discontinue offering new Personal and Portfolio line of credit accounts and close all existing accounts,” the bank said in the six-page letter. The move would let the bank focus on credit cards and personal loans, it said.
Wells Fargo CEO Charles Scharf has been forced to make difficult decisions during the coronavirus pandemic, offloading assets and deposits and stepping back from some products because of limitations imposed by the Federal Reserve. In 2018, the Fed barred Wells Fargo from growing its balance sheet until it fixes compliance shortcomings revealed by the bank’s fake accounts scandal.
This cap on asset growth has ultimately cost Wells Fargo billions of dollars in lost earnings, when we compare it to rivals like JP Morgan and Bank of America over the past three years, according to analysts. Wells Fargo halted the addition of all new home equity lines of credit (HELOCS) just last year, months later they also withdrew from a segment of their auto lending business.
With this latest move, under their FAQ section Wells Fargo warned this “may have an impact on your credit score” and under another part they asserted that account closures couldn’t be reviewed or reversed stating “We apologize for the inconvenience this Line of Credit closer will cause”, “The account closer is final”.
I had originally predicted that Wells Fargo would be the next bank to fall and it would close in 2019, clearly they have beat my expectations but at the cost to their customers once again. I have never been a fan of Wells Fargo and always encouraged people to end their business dealings with them, maybe this will finally be the warning bell people need.
Of course Sen. Elizabeth Warren, who is a frequent critic of Wall St banks, chimed in on this decision.
After publication of this article, a Wells Fargo spokesman gave additional remarks: “We realize change can be inconvenient, especially when customer credit may be impacted,” the bank said, adding that it was “committed to helping each customer find a credit solution that fits their needs.”
Customers have been given a 60-day notice that their accounts will be shut down.