In a not-exactly-shocking development of the ongoing Wells Fargo account faking scandal (see our previous coverage here, here and here if you’re late to the party and need a quick catch-up) CEO John Stumpf, fighting a rear-guard action, is making outlandish claims about how, having begun the process of contacting customers who it has cause to believe may have either been mis-sold a product — or even not “sold” one at all and merely had an account opened without their knowledge on the back of faked paperwork and signatures — Wells’ is starting to conclude that only a relatively small minority of the cases they have reviewed have shown there was anything amiss.
According to Stumpf’s statement Wells Fargo has “talked” to 20,000 customers about their credit card product, but only 25% said they didn’t want a credit card or don’t recall asking for one. From the New York Times:
Wells Fargo has said it is contacting all of the customers who may have been affected. So far, the bank has contacted 20,000 customers with questionable credit cards. About a quarter of them have said that they did not apply for the card or could not remember if they had, Mr. Stumpf said at the hearing.
Stumpf brought up his outreach results at every possible juncture, to argue that the fake sales numbers from the earlier investigation were overly high estimates and the majority of customers had wanted the products.
So that just goes to prove that all is just fine and dandy then? No, anything but. There are two main problems with Wells’ tale of hearing no evil from its customers and contending that there is no evil to be seen.
Firstly, while the claim is that “only” 25% of customers who were contacted might need further follow-up because there is strong evidence of a fake account, this figure is definitely going to be an underreporting of the true proportion.
There’s nothing especially wrong with the premise – the trigger criterion being a customer stating that they did not want a Wells Fargo brand credit card, or had received one but hadn’t applied for it – because this is pretty conclusive that there was something seriously wrong with the sales process which generated the account opening. It is though tantamount to admitting to the lack of any waterproofing of what the employees of Wells Fargo had got up to by routinely sampling a percentage of claimed sales. The UK’s Financial Conduct Authority (FCA) regards monitoring of sales data as a basic foundation of any compliance checking. The present customer call-up is in essence a catching up on that activity, which Wells Fargo had failed to do contemporaneously with the sales being claimed.
But the real problem for regulators and lawmakers is that they will likely lack the level of subject matter expertise to challenge sophisticated and mercenary financial service industry players such as Wells Fargo and put the results being claimed by Wells’ into their proper context. Those running investigations into the Wells Fargo scandal would probably not think to check just how high the level of churn in this type of product (credit cards) is. According to the FCA, each year around 14% of customers with a credit card take out a new one. The figures for the US market are almost certainly higher, because there is less consumer protection around oversolicitation. Brand loyalty for credit card products is the lowest of any retail financial service. Customers, regardless of credit-worthiness, are constantly plied with new products with features like teaser offers, reward gimmickry and other similar a-la-carte product design such as fee waivers, insurance-add-ons or payment holidays.
This means that, if asked, many customers would be hard pressed to remember, for any particular brand of credit card, whether they had in fact ever applied for one or, if they hadn’t applied for a credit card product from that financial services provider, whether they’d received a card and had an account opened without their asking for it. No-one ever likes to admit they are disorganised in their own financial affairs but a combination of time stress and low prioritisation means the average person has a high probability of not being fully aware of precisely what products they hold and with which provider. So asking this sort of customer base to self-report and expecting to receive accurate results is doomed to failure.
Bad though that failing of investigative methodology is, the second glaringly obvious shortcoming is that the wrongdoer, Wells Fargo, is investigating its own wrongdoing by having its own staff call up their customers and, if we’re to believe Stumpf, “asking” for those customers to identify any issues they are aware of. Foxes are not traditionally put in charge of guarding henhouses.
Frankly, Wells Fargo has no business being involved in any investigations into the fake account opening. It is incentivised and motivated to apply the same varieties of inducements to the sales review call-handling teams contacting the customers to not find anything suspect with the credit card accounts that it applied to the sales staff who faked the sales in the first place.
Even if, due to the difficulties in any external party being able to get the required data and resource up an operation to undertake the sales reviews which Wells Fargo is performing and there isn’t any reasonably practicable option to have the review done by a genuinely neutral third party, there absolutely has to be monitoring of Wells’ customer contact initiative. This is not difficult to put in place. Call centres are industrialised operations and the ability to monitor their activities or agent behaviour is similarly automated and mature.
In order to have even a shred of credibility, Wells Fargo should publish, alongside the promoted headlines about “only 25% of card accounts might be suspect” figure, full details of exactly what incentive scheme is in place for the team contacting customers alongside the approach it is using for employee performance management. If the call-handling teams are subject to carrots and sticks being wielded by Wells’ management, Wells Fargo should ‘fess up to exactly what those carrots and sticks look like.
And Wells’ should also publish the guidance it gives to the call handlers, supervisors and managers about call quality. What, from Wells Fargo’s standard procedures for those making the review calls, constitutes a high quality call? If, as is usual, there is a call script, what does the script say? For bonus points (no pun intended), Wells’ could also state if they collect Management Information — at an individual employee or team level — about the percentage of customers who did and did not report a problem and then look for spikes in particular employees or teams. That’s a good way to tell if anyone or any group within Wells Fargo is trying to play the system and achieve particular outcomes, for whatever reason.
Without this context, any figures bandied about from Wells Fargo’s already shop-soiled CEO lacks the credibility which the bank needs to even begin to restore its reputation.