Legal, Regulatory, and Privacy Issues

Protect yourself from banks ‘cross-selling’ fake accounts


Checking up on your bank requires more than reviewing account statements and standard credit reports

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Is your bank secretly signing you up for accounts or services you never ordered?

Wells Fargo has admitted opening some 2 million potentially unauthorized accounts, including 565,000 credit card applications, as a result of incentives to “cross-sell” multiple accounts to customers.

In the wake of the scandal, the U.S. Office of the Comptroller of the Currency is launching a broad review of banks’ sales practices, chief Tom Curry said Tuesday. Wells Fargo took cross-selling to extremes — its goal was eight products per customer — but the sales tactic is common as banks struggle to shore up their profits.

“Banks are under enormous margin pressure,” the top bank regulator said Tuesday at a hearing of the Senate Banking Committee. U.S. interest rates have been at rock-bottom lows for years, limiting the profits banks can earn on loans.

Being scammed by a bank may sound far-fetched, but not even U.S. senators are immune. New Jersey Sen. Bob Menendez said he once signed up for a free checking account at a bank he didn’t name. Later he found out he was enrolled in a fee-based account instead.

You have to look for unexplained transfers out of your account.

— Edgar Dworsky,
Former Massachusetts assistant attorney general
in consumer protection

“Their hard-sell system caused people to slam me with stuff I didn’t want,” he said during the hearing.

How to check up on your bank

What can you do to make sure you are not caught up in a bank’s overly aggressive sales push?

The obvious first steps are to check your credit report and bank statements, consumer advocates say. If there are accounts or transactions you don’t recognize, call the bank. If you don’t believe the bank is taking the issue seriously, consider filing a complaint with the Consumer Financial Protection Bureau.

“You have to look for unexplained transfers out of your account,” said Edgar Dworsky, former Massachusetts assistant attorney general in consumer protection. Few people scrutinize their account statement that closely, he added. “It would never cross your mind that would happen at a bank,” he said of the creation of sham accounts.

Credit reports will help you check information from your bank, but they don’t cover all the bases. The standard credit report — issued by one of the major credit bureaus Experian, Equifax and TransUnion — has information about credit card accounts and other loans, but checking accounts are excluded.

To monitor checking accounts independently of your bank, consumer advocates advise filing a request with two major alternative credit information companies: ChexSystems and Early Warning Systems. The companies keep track of deposit accounts that are closed for unpaid fees and overdrafts.

  • To obtain your report from ChexSystems, go to the consumer disclosure page of its website and fill out the request form online, or call 800-428-9623. Be prepared to give your driver’s license number, Social Security number and a mailing address.
  • Early Warning Systems takes requests for consumer reports by phone at (800) 325-7755. The representative will ask for your Social Security number and tell you on the spot if there is negative information in your file. You can also ask for a request form to obtain your file by mail.

“Unfortunately, often unauthorized accounts show up after they create problems for a consumer,” Chi Chi Wu, staff attorney at the National Consumer Law Center, said in an email statement.

At Wells Fargo, workers facing tough sales goals sometimes moved money from legitimate accounts to fund fake ones. This triggered overdraft fees in legitimate accounts as well as monthly fees in fake accounts, according to the bank’s settlement with the U.S. Consumer Financial Protection Bureau. False phone numbers and email addresses were used to cover up the unwanted accounts, and false PINs were made up to go with unwanted debit cards.

Unfortunately, often unauthorized accounts show up after they create problems for a consumer.

— Chi Chi Wu
Staff attorney at the National Consumer Law Center

Bank customers will receive refunds of improper fees resulting from fake accounts under a settlement with financial regulators.

“We will make it right,” Wells Fargo Chairman John Stumpf told the hearing. In addition to returning fees, the bank will determine if unpaid fees on fake accounts damaged customers’ credit reports, he said in response to questioning. Negative credit information could cause those customers to pay higher rates on loans from Wells Fargo or other lenders.

The bank is supposed to contact customers and former customers as it determines the extent of the problems. In addition to making refunds expected to total at least $2.5 million, Wells Fargo will pay $100 million in fines to the CFPB, $35 million to the OCC and $50 million to the city and county of Los Angeles, which began its investigation into the bank’s sales practices in 2013 after a series of stories in the Los Angeles Times.

Members of the banking committee questioned how the bank overlooked the scandal for so long. Signs of the problem began to surface at least as early as 2011, when the bank began firing employees caught creating false accounts. Since then, Wells has fired 5,300 caught up in the scandal. Blame focused on the bank’s quotas for the employees, who faced discipline and dismissal unless they met high cross-selling goals.

CFPB director Richard Cordray told the hearing that improper sales of bank products are not new. Since 2012, the agency has fined 12 banks for enrolling customers in unwanted balance protection and credit monitoring programs. The banks blamed weak oversight of call-center contractors who sold the products on their behalf.

“Much bank growth these days occurs by cross-selling customers on more products and services,” Cordray said. “This action should serve notice to the entire industry.”

The long-entrenched scandal at Wells Fargo shows that bank sales programs can go off the rails, Dworsky said. “It is so outrageous,” he said, “you have to wonder if it is happening other places.”

See related:Wells Fargo’s huge fine: inside the numbers, Citi refunding $700 million for credit card add-ons

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