A pedestrian wearing a protective mask walks past a Wells Fargo & Co. bank branch in New York, USA, Thursday, July 9, 2020.
Peter Foley | Bloomberg | Getty Images
Wells Fargo is ending a popular consumer loan product that is twisting some of its customers, CNBC has learned.
The bank will close all existing personal lines of credit in the coming weeks and will no longer offer the product, according to a customer letter reviewed by CNBC.
The revolving credit limits, which typically allow users to borrow $ 3,000 to $ 1
“Wells Fargo recently reviewed its product offerings and decided to stop offering new personal and portfolio credits with credit accounts and close all existing accounts,” the bank said in a 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 pandemic by discharging assets and deposits and resigning from some products due to restrictions from the Federal Reserve. In 2018, the Fed prevented Wells Fargo from expanding its balance sheet until it remedies deficiencies in line with the bank’s fake account scandal.
Asset capital has ultimately cost the bank billions of dollars in lost earnings, based on the balance sheet growth of rivals including JPMorgan Chase and Bank of America over the past three years, analysts have said.
It has also affected Wells Fargo’s customers: Last year, the lender told staff it stopped all new credit capital for homes, CNBC reported. Months later, the bank also withdrew from a segment of the auto-lending business.
With its latest move, Wells Fargo warned customers that account closures “may have an impact on your credit score,” according to a frequently asked question segment in the letter.
Another section of frequently asked questions claimed that account closures could not be reviewed or reversed: “We apologize for the inconvenience this credit closure will cause,” the bank said. “Account closure is final.”
Wells Fargo did not directly answer questions about what role, if any, the Fed asset ceiling played in its most recent move.
The bank issued this statement: “In an effort to simplify our product offerings, we have made the decision to no longer offer personal credit lines as we feel we can better meet our customers’ borrowing needs through credit card and personal loan products.”
Customers have been given a 60-day notice that their accounts will be closed and remaining balances will require regular minimum payments, according to the statement.
The move is bizarre given the banking sector’s need to boost loan growth.
Following a series of commercial lending in the early days of the pandemic, lending growth has been difficult to obtain. Businesses have spent money raised on inventory and debt issuance to retire to bank credit lines, and consumers stuck at home had fewer reasons to use credit cards.
In fact, large banks last year saw the first overall drop in lending in more than a decade, according to Barclays banking analyst Jason Goldberg. Of the four largest U.S. banks, Wells Fargo saw the worst decline.
After banks saw that borrowers were holding up far better than they had initially feared, the industry recently began marketing new credit cards with large sign-up bonuses in an attempt to increase lending.
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Wells Fargo does not disclose how many customers have used the credit limits it eliminates. It had $ 24.9 billion. In loans in a category called “other consumer” per. March, which was 26% lower than the year before.
One customer said the change prompted him to switch banks after more than a decade with Wells Fargo. Tim Tomassi, a programmer in Portland, Oregon, said he used a personal credit line attached to his checking account to avoid expensive cash claims.
“It’s a little disturbing,” Tomassi said in a phone interview. “They’re a big bank and I’m a small person and it feels like they’re making decisions for their bottom line and not for customers. A lot of people are in my position, they need a pillow every once in a while from a line of credit. “
Tomassi said he is considering opening an account with Ally or Chime, bankers who do not charge overdraft fees.
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