A Reason to Stop Banking with Wells Fargo

Even though deciding which TBTF is the worst is like a having an ugly contest between Cinderella’s sisters, Wells Fargo may deserve pride of place. Yes, the Vampire Squid sorta owns the government. JP Morgan has too many people believing it didn’t need a bailout during the crisis. Ahem, what about a $76 trillion derivatives clearing operation don’t you understand? If AIG or Morgan Stanley had failed post Lehman, JPM would have been next. And it is the most aggressive bank I have come across in the “gotcha” fees and bait and switch as far as retail customers are concerned.

But Wells is sanctimonious and too often has taken the position that it is less badly behaved than other banks, which grates on me. It has played fast and loose with its balance sheet reporting, and has lied to Congressional staffers, claiming it hadn’t engaged in robo signing when there were depositions in the public domain to the contrary.

Hopefully, not many NC readers are having to think seriously about filing for bankruptcy. But the practice described in this post at the San Diego Bankruptcy Attorneys Blog reads as bad faith dealings (and if someone from Wells reading this might dare to disagree, we can have a conversation about the past and ongoing certifications, which are included in SEC filings, that your bank has made as trustee in numerous mortgage backed securities offerings):

Wells Fargo has an interesting corporate policy, and by “interesting” I mean to say “bordering on the criminally fraudulent.” If you have a regular checking account at Wells Fargo, and file for bankruptcy, the bank will freeze your assets — even if you don’t owe them a dime.

Think on that for a second….. You’ve never bounced a check in your life and have never borrowed money from Wells Fargo, not a credit card, not a mortgage, nothing.

But you fall behind on your debts and…you decide your best option is to file for Chapter 7 and get a fresh start. You list a Wells Fargo checking account on Schedule B as an asset, as you’re required to do by federal law, and provide the address of the bank branch and account number.

A week after filing, you go to the ATM but the machine eats your card. You go inside and ask the teller what’s going on, and he says “Sorry, your account’s been frozen.” You ask to speak to the manager, who looks at the same computer screen and also says it’s frozen.

How do you get it unfrozen? How do you not default on your car and mortgage and power bill? According to Wells Fargo’s national policy, they will only release these funds if the bankruptcy trustee appointed in your case asks them to, or if they’re ordered to do so by the court. Which takes at least a month.

My advice to every single one of my clients is to take that money out of Wells Fargo immediately and park it at another bank or credit union where you don’t have any loans or credit cards.

Update 5:30 AM: Reader JoJo in comments confirms my suspicions. This story comes from ABC,
Bank confusion turns into $10,000 problem

PETALUMA, Calif. (KGO) — The common banking practice of making a deposit turned into a $10,000 nightmare for a Bay Area man and his daughter. Their money disappeared.

Myron Hinrich of Petaluma helps support his daughter, Anne, while she studies film-making at USC.

“She’s struggling in graduate school; she needed to make a rent payment,” Hinrich said.

Anne was low on cash so Hinrich deposited a $10,000 check into Anne’s account at Wells Fargo Bank. However, what happened after that came as a complete shock.

“They said the check was fraudulent, they canceled the account and they didn’t want to see her again,” Hinrich said.

Wells Fargo refused to give Anne the $10,000. Instead, the bank abruptly closed her account and told her to go away. The only explanation? The bank claimed the check was a fraud.

It gets worse. Wells refused to return the money to her father….

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  1. bob goodwin

    wells fargo also has a policy of never doing business with any person who declared Bankrupcy which costs Wells fargo any money. Yep, that means they won’t give you a checking account, they won’t give you a mortgage, they won’t sell you a CD.

    When I was shown the letter someone got from Wells Fargo I was quite surprised. Banks regularly use limited liability to their benefit. But the unwashed masses are different.

  2. attempter

    What’s the point? They think the account is likely to soon be liquidated, and want to extort an interest-free loan as long as possible?

    How does the bank become aware you filed for bankruptcy if it’s not even a creditor?

    Transcending all this, why are people still banking at any of the TBTFs? Move Your Money!

    1. Paul Repstock

      Yves wrote, ” You list a Wells Fargo checking account on Schedule B as an asset, as you’re required to do by federal law, and provide the address of the bank branch and account number.

      1. attempter

        Isn’t that for the court and creditors? I asked how a bank who is not a creditor finds out. Is the system so totalitarian that that’s simply a childish question?

        If I list a car which I park at a relative’s house, does that relative receive a letter from the court about my bankruptcy filing?

        1. Fog Horn Leg Horn

          How does a non-listed creditor know you filed bankruptcy? Good question, there is a company out there called AACER, who reports to anyone who subscribes (read TBTF, Insurance, etc…..) the up to the minute bankruptcy petitions of the un-washed masses.

          The problem becomes when somebody like say, a small community hospital files a proof of claim (proving the debtor owes them money) and attaches the necessary “proof” (which the TBTF never do, how pedestrian) and that “proof” includes the debtors entire medical history (say HIPPA violation) and the debtor’s complete name, address and social security number (bankruptcy redaction violation) and all that information gets transmitted to the court via the federal website PACER – and then within seconds, ACCER pushes it out to every subscriber. Now, the debtor’s attorney can (if they aren’t asleep) file a motion for sanctions for the lil hospital breaking all the rules, but they CAN’T stop the dissemination of all that information to ACCER’s subscribers, because it happens instantly.

          But to answer your question, yes, anyone in America, even you, can subscribe to AACER and find out who files the BK, instantly, as it happens, faster than Fox News.

          1. required

            I don’t know about AACER (although I guessed correctly the first A stood for Automated) but for years I wrote software for another company (and there are MANY) to collect new filings and updates for Chapter 7, 11, and 13. Equifax was one of our clients. Since the majority of cases are filed electronically, my software would find the case in less than 24 hours and the business world would know the next day.

            See Public Access to Court Electronic Records (PACER) and Case Management/Electronic Case Filing (CM/ECF) which is the system behind it all.

  3. Phil Perspective

    But Wells is sanctimonious and too often has taken the position that it is less badly behaved than other banks, which grates on me.

    It gets away with it because one of its largest shareholders is the Oracle of Omaha. And nothing bad would happen under is watch, right?

    1. wunsacon

      I can’t stand that guy now.

      And to think I was once contemplating attending the shareholder meeting. Phooey.

      1. Nathanael

        Berkshire Hathaway shareholders, which includes me, are going to lose a bundle when Wells Fargo finally admits its bankruptcy.

        Buffett, unfortunately, is a fool in some ways. He’s been bitten *twice* by trusting criminal managements (who were also gambling recklessly) at companies he acquired, and he just did it a third time.

  4. Paul Repstock

    Let me guess…This will allow them to treat the depositor’s account as their asset for the duration of the bankruptcy case, charge administrative fees against the bankruptcy, and if the victim looses everything as is likely with frozen accounts, then they get paid a “finder’s fee” from the creditors…Sound about right?

    Besides, it lets them kick one more little guy in the strategic regions.

    Chalk up one more for the singularity.

  5. Kevin

    Wells is the best bank I ever had. Not a single problem, ever. I just love to hear complaints about banks from people. The situation is usually that they don’t manage their money very well (like bankruptcy) and blame the financial institutions for their problems.

      1. gordon

        You can find horror stories about ANY bank, many are fabricated due to hate of the Banksters in general. My son was looking for a new bank w/ free ATM, Ally paid the highest interest (he SAVES, whiners) and these type boards had all those “horror” stories. He opened an account online and has had NO PROBLEMS. They’re FDIC, 1.5% or so rate above $15K (a lifetime for you whiners, I know) and the banksters are going to IPO Ally like they did with GM, making them even safer. Learn to make money against the banking cartel, they’re not going away. Credit unions, unfortunately usually don’t have good online sites or ease of services, but they specialize in auto loans, where you can get a sub-prime one again now. Banksters brought those back too.

      2. Bill

        Gordon, did you notice the link to the story about the man who deposited 10,000 into his daughters account? The bank took the money and closed the daughters account. The family was out 10,000 for over a year. Chump change right? Didn’t matter that he had records showing the deposit which wells took from his account. Even the comptroller of currency refused to do anything. The error wasnt fixed untill the local news station reported on it.
        Hope this never happens to you and yours. You would probably just write it off as a cost of doing business right? You surely wouldnt “whine” about it.
        Your son is really taking the banking cartel to the cleaners with his 1.5% interest rate. Whoopeee.
        Tell yourself whatever you like to justify doing business with these leeches. The truth is obvious for anyone with a functioning brain to see. The banks are killing our country.

    1. Jojo

      Do you work for Wells, Kevin? If not, maybe you have just been lucky (so far). I’ve heard lots of horror stories about Wells Fargo.

      And what other banks have you done business with? How long with each one? What kind of business do you do with them? Why didn’t any of these others work out for you?

      1. readerOfTeaLeaves

        I had 10 accounts with WF, and had been a long time customer with a ‘golden’ credit record.
        I could write **pages** of detailed screw ups and compounding errors related to my WF accounts between 2008 and Dec 2010.

        It’s quite possible that most of my banking errors originated from an overly complex system that resulted from the WF buyout of Wachovia. After that buyout the number of my banking errors, fees, and the interest rates on both my personal and business accounts skyrocketed. I’d banked at what’s now WF over 20 years; however, I estimate that 90% of the problems that I’ve had with that bank occurred in the past 24 months. By Dec 2010, I paid off loans, closed accounts, and moved on.

        Life is too short to deal with these people.

        My heart absolutely goes out to anyone who is still caught in the maw of WF. My (nightmare) experiences with WF have given me a powerful motive to make reading financial blogs (esp NC), and related books a part of each day. Reining in finance and out-of-control corporations is THE key issue of our era, if for no other reason than that they are killing small businesses and screwing our economy (including government budgets and pensions).

        I am very concerned that the overly complex systems at US banks have morphed into a gigantic petri dish for criminogenic behavior.

        I’m also convinced that even decent bank employees are now dealing with so much complexity that the number of errors they make in a day’s work is rising exponentially, primarily because there are too many options, products, fees, etc, etc. It appeared to me that the multiple banking divisions, an array of financial products, and the number of business systems they interact with in the course of a day’s work are producing some kind of catastrophic information overload; the right hand has no clue what the left hand is doing. And trying to coordinate the two can take an insane amount of time and energy.
        These monsters are so complex that decent people are going to make mistakes, and predators are going to rip people off and never be caught.
        I don’t want to underwrite the former, and I want the latter in jail.

        At least my experience with WF led me to conclude that this bank is far too expensive and incredibly inefficient.
        Unless, of course, you’re actually a white collar criminal trying to sting people for fees.

        Most of my accounts are now at a credit union: they don’t pay their execs obscene bonuses, they don’t offer ‘financial products’ every time I walk in their door, and they keep things SIMPLE.

        After my experiences with WF, I’ve concluded that any time it takes me more than five minutes to resolve a banking issue, something’s wrong.
        Money and bank accounts and credit rates are not fundamentally complicated things. But there is not a lot of profit in simplicity.
        The only way these banks could be churning the profits to pay their exec bonuses was to mystify and complixify money so much that it intimidated millions of Americans who feel powerless to figure out all the mumbo jumbo.

        It’s my view that the banksters have set themselves up for some serious blowback. Personally, I no longer have an iota of sympathy for any of them.
        I honestly believe some of these idiots would think that squeezing blood from a turnip is a ‘business model’, and I don’t think it’s possible to be any more stupid than that.

    2. Yankee

      We only had one experience with Wells. Had to cash savings bonds over 20,000. Though the banks are required to cash bonds even though you don’t have an account, they limit the amount to 1,000/day. They pushed to have us open an account saying then they would cash them all. Then it got interesting.

      First, they took our information, and ran a credit check…to open a savings account. They way we were treated was “I see you don’t owe us any money, even though someone with the same name in another state did” She continues to ask questions like gross monthly income. I ask why she’s filling out a loan application when we are just opening a savings account, and she insists its just a “personal profile”. Now, that she’s confirmed that we are not deadbeats and credit worthy, she starts slamming us with minimum amounts we have to keep to avoid fees. At that point I inform her we are not interested in a loan or any banking here and we walk out.

      Sickening the way they treat people like peasants to be sheared. Obviously because they get away with it.
      We showed up every day to cash our 1,000 limit until the bonds were cashed.

    1. Paul Repstock

      Perhaps it is a discriminatory bank?? Sanctimonious people get preferential treatment.

  6. Jojo

    Another reason not to bank with Wells Fargo. Here’s a consumer horror story:
    Bank confusion turns into $10,000 problem
    Friday, March 04, 2011

    Michael Finney
    More: Bio, Blog, Facebook, Twitter, News Team

    PETALUMA, Calif. (KGO) — The common banking practice of making a deposit turned into a $10,000 nightmare for a Bay Area man and his daughter. Their money disappeared.

    Myron Hinrich of Petaluma helps support his daughter, Anne, while she studies film-making at USC.

    “She’s struggling in graduate school; she needed to make a rent payment,” Hinrich said.

    Anne was low on cash so Hinrich deposited a $10,000 check into Anne’s account at Wells Fargo Bank. However, what happened after that came as a complete shock.

    “They said the check was fraudulent, they canceled the account and they didn’t want to see her again,” Hinrich said.

    Wells Fargo refused to give Anne the $10,000. Instead, the bank abruptly closed her account and told her to go away. The only explanation? The bank claimed the check was a fraud.


  7. Gordon Brooks

    My only recent experience with Wells Fargo was to cash an American Express traveler’s check at a branch in California. It took five different people to come to the conclusion that it was okay to cash a traveler’s check.

  8. kravitz

    Okay, I hold stock in this mess in a covered wagon dress.

    The only thing the stockholders can start to do is make these monstrosities more humane from the inside out. Probably.

  9. gordon

    Some of these stories are fabricated, no doubt. Wells is cautious, which in the long run makes them more solvent. I’m dismayed they won’t lower our mortgage rate but it’s because we have enough savings to pay off the loan, although we need it, being unemployed. I’ve made decent money investing in their preferred trusts that sell like a stock, so maybe you whiners go to a credit union instead and try saving money and investing (they pay around a 7% yield, although they may have their TierI status changed if financial reg ever goes through, by 2014)

    1. Yves Smith Post author

      There are all of two stories here (five if you count the ones in the thread). What basis do you have for saying the are made up? A BK attorney who has a pretty inactive blog and a news station have no reason to be making stuff up.

      There is a big difference between a screw up and a pattern of customer abusiveness. There is NO defense for either of the fact sets described in the post. They are a matter of policy, not lower level operational error.

  10. brian

    Prescient! Wells Fargo creates trustees! The link goes to USAA mortgages rather than what you appear to be saying,
    But as the creation of trustees, it is a fact. Funny, they created one they used for 11 years, it never existed. If your state requires that the trustee be a human or a corporation, You win. Email me if you want the name and info.

    1. gordon

      My COBRA ends soon, I’ll look into it, although they’re probably just tacking on a fee to direct somewhere else. Not much has been written about a disturbing trend, the HMOs are buying up Primary Care facilities. Nothing is being done about the HMO and Bankster Cartels getting bigger, certainly under Obama, who is a fraud.

    1. Cedric Regula

      They are there to assume the role of regulator of things everyone knows should be regulated, but are the agency to give the job to if the powers-to-be want something to be unregulated. Like weird derivatives, big banks, things like that. They are the UnCola.

      1. Gentlemutt

        They exist to harshly apply the lessons learned from TBTF banks… exclusively to smaller (ie, “community”) banks as a way of keeping real competition from threatening the TBTF banking oligarchy.

        No angels anywhere in the marketplace, of course, but regulatory bias makes TBTF free from worry about significant competition ever bubbling up from below.

        And this is not part of some grand conspiracy. It is just a function of how the OCC and its staff work (and how they worry about keeping their own jobs), as well as where the leadership comes from. Obama could fix it but, to paraphrase the man, “he don’t get it.”

  11. Anonymous Comment

    Hmmm. That is tragic. If you are falling behind, one thing you need more than any else is your cash to keep your whole life from falling off a cliff. I can imagine the emotional toll having their money blocked has taken on such individuls.

    As dubious as it is for WF to block funds of people in bankruptcy… they do they same thing to high net worth clients who are in no trouble at all. They use other reasons, but the effect is the same.

    My feeling is that 50 years from now, when all the truth comes out, people are gonna find out that W.F. was a leading factor in why the recovery did not take roots.

    And just as a tin-foil aside – if you try to get your attorney to take action against them, and get you your money – you might find your attorney in a fatal hit and run on the day the papers were to be signed. I am not even kidding.

    It’s worse than most people know.

    1. Further Comment

      Probably coincidence, right?

      Either way, it ends there. Because you won’t be inclined to risk another brave and innocent person’s life, just in case.

      P.S. Word to the wise… Don’t try to get him to finish anything up on his deathbed, cause his eventual widow will understandably consider you evil incarnate. Not very lolz at all.

  12. Humblepie2008

    I have a personal experience with Wells Fargo. This happened in 2002. My parents, who were quite old (80’s & 90’s), had a joint account at WF. My mother also has a WF credit card. I routinely check her bank statements for her. To my horror, I discovered debits of over $200 under the category of interest payments for credit card loans. The payments were debited directly from her checking account at Wells Fargo. I think she was billed several months for this ‘interest payment’ without being aware of the issue. My mother always paid her credit card balance in full before the grace period expires and never carried a balance. Luckily, we were able to have the bank identify the ‘error’ and did not have too much trouble in closing out the account without prejudice. We never banked with Wells Fargo again. But that was in 2002. I think they’ve devolved since then.

    1. Nathanael

      I ended up with a Wells Fargo account in the 1990s when they bought Norwest.

      Service quality declined immediately, and Norwest wasn’t that great to start with. When the notice came of new fees, I closed the account pronto.

      I see I was wise to do so; they appear to have been degenerating continuously since then.

  13. Riemann Sum

    This is a small matter, but reading all the above has me concerned. I recently bought a car, and financed part of it through WF because they had the best rate. About a week after the purchase, I also switched insurance companies to a local one with an agent I new personally.
    Friday, I received a notice from WF that my new car was uninsured and that I needed to provide them with the declaration or they would charge me $166/mo in “insurance” only covering the value of the vehicle. I am very nervous until business opens Monday and I can call my agent.
    I am sure that he sent them the paperwork on the new policy. The fact that the TBTFs “lose” mortgage paperwork causes me concern about this matter. There is no “act by or else” date on the notice; if they hit me with this charge and I don’t pay it, then obviously they’ll repo the car if I can’t get it fixed. Makes me regret that my wanting to save 151 basis points led to this.

    1. readerOfTeaLeaves

      Good luck to you. Keep photocopies of EVERYTHING you communicate to the bank, and take notes of the date, time, and person with whom you spoke and note WHAT you discussed with them, and what you understood was the action to be taken.

      Then check back two days later to confirm that things were processed correctly. Keep all copies of faxes, emails, or any form of communication, if for no other reason to show them that you did call on an account on such-and-such date, spoke with Ms X, and understood that x or y would occur. Keep your own records; do not trust theirs.

      You may want to consider looking into an alternative loan, just to get out of WF’s maw. And keep reading the finance blogs, because it sure seems to me that the banks want us dumb, uninformed, and clueless.

      1. Nathanael

        Also, use certified mail. It gets expensive, but with companies which “lose” paperwork, it’s only proper to do it routinely.

  14. Phil

    Am I missing something but wouldn’t common sense tell you to close all your cash accounts prior to filing?

    1. Wendy

      No, why would you? You are going to need a checking account to pay your rent or mortgage after you file, right? And you’ll need your debit card for day-to-day purchases? Closing your bank account would make your life much harder.

      Now for credit accounts, you do have to close those accounts, or rather, they are closed for you. So you need a debit card more than ever, til you get a new credit card post-BK.

  15. mario

    I only had an account with WF for about 2 months a while ago. After continuous problem solving I gave up on them. Never again…

  16. mario

    I mean the red flags were all over the damn place. The clients mentioned probably ignored them until it was too late.

  17. Joni Brit

    Thomas Jefferson said it best: “I believe that banking institutions are more dangerous to our liberties than standing armies. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
    The US’s tax deductible investment, the REMIC(Readily Extra Moola and Cash to Invest)in the greatest Ponzi scheme since the beginning of time. Wells Fargo, of course, being the Master Servicer of almost every Trust, The Major General. More foreclosures were caused because people missed a motion on a fraudulent assignment because they did not have a lawyer, then because they were in default. This is the generation of children of dashed dreams and they are never going to recover. Never Never say it is their fault!! This is the opposite of the generation that grew up in Reagan’s time.

  18. JayT

    A few facts you should know to put this stuff in context.

    First, the bankruptcy law requires the banks to freeze your assets and turn control of them over to the Court – because once you file bankruptcy what you are doing is giving the court control of your financial situation. It then determines how to handle your debt – from your mortgage down to your monthly gas bill. If you think you can file, walk away from your debt, and spend your cash – you’re wrong. The judge decides.

    Secondly, the banks are required by law to obtain TONS of information on you to open an account, cash savings bonds, or doing just about any transaction. This is to thwart terrorism. ( I bought a used car 9 months ago, with cash, and they ran a full credit report on me and needed my social and everything…. ) why? because the gov’t requires any large cash transaction to be filed with them, again, as a way to try to unearth money laundering for purposes of terrorism, etc.

    Believe me, the banks would rather not have to obtain all this data on people – it’s expensive, takes time, and they get constantly audited to ensure they are collecting it and they get fined if they dont get it. If you dont like it, write your congressman, and good luck with that!

    1. bob

      “I bought a used car 9 months ago, with cash, and they ran a full credit report on me and needed my social and everything….”

      Why would you buy a used car from whomever required this? Why would you authorize them running a credit check on you? Let me guess, it was policy?

      It’s not the law. Walk your money right out the door and find someone else to do business with.

      Everyone just hands out their SSN’s when they are asked. Sure, here you go…

      I was involved in a car accident. I was told by the other parties insurance company that they needed my SSN before they could cut a check to cover the damage.

      Nonsense. I threatened to take them to small claims court, I had a check delivered in a day. No SSN.

  19. Sam

    People this issue is much broader than Wells Fargo. I went through a bankrupcy a decade ago and I remember that both Citibank and what was then Chase Bank also had similar policies. I suspect you’d find out that the entire banking industry does this.

    In other words if you are planning on declaring bankrupcy, task #1 should be to close any account you have with a major bank – go open an account at a credit union, keep it in cash, or put in in the name of a family member.

  20. HarrisonBergeron

    Wow, I have never seen so many trolls/banking industry apologists on one thread, why don’t you take lloyd blankfein or jamie Dimon’s cock out of your mouth before you speak. Bowing and scraping before the banksters online will get you no mercy once the pitchforks and torches come out. consider yourselves warned

  21. aikanae

    It’s almost misleading to focus on a particular national bank that does these types of things when they all do it (except the money laundering, I hope. But banks were on the side of Nazi’s DURING WWII).

    There needs to be national policy and regulatory change for ALL of them. Just the mortgage fraud alone is enough to place them in with other domestic terrorists.

    What scares an average person more – being bombed by the Al Queda (if Bin lauden existed), denied medical care by health insurance or random misleading acts by national banks that take away their homes? ______ (fill in the blank).

    Isn’t a job of the government to protect it’s citizens? Well that includes from preditory corporations too.

  22. David

    Anyone who banks with a big, national bank, especially a TBTF bank, is setting themselves up for problems. The banks got this big by treating customers as numbers, as inanimate objects subject to their sets of rules. It is the FOOLS who continue to bank with them who are the problem.
    Do you really want them to change? You have to do it in a way they understand – STOP DOING BUSINESS WITH THEM. PERIOD. YOU, who took out a car loan with them, YOU are enabling their behavior. YOU, who has a mtg. with them, YOU are enabling them, too. If you learn nothing else learn this: you can never change the behavior of someone else (including businesses), you can only change YOUR OWN behavior. Mull on that until you get it.
    Now, don’t EVER do business with them again. No car loan, no checking account, no credit card, no investments, nothing. ONLY THEN will they get the message and decide too change themselves. NOW DO IT! And quit bitchin’ about it….

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