Wells Fargo scandal

The Wells Fargo unauthorized account opening scandal is now spreading to its small businesses lending practices nationwide. Wells Fargo is not a franchise company per se, but is perhaps more involved in franchising than any other company. Wells Fargo makes loans to small businesses including franchisees to open restaurants, hotels, and many other types of franchise businesses. Wells Fargo is the nation’s leading small business lender and the leading participant in the federal government’s SBA, small business administration lending program. Similar to guaranteeing real estate loans, a bank loan to a small business is guaranteed by the federal government through the SBA. As usual, it is the taxpayer who is ultimately responsible for these loans.

The scandal surrounding Wells Fargo is currently under investigation by the US Senate Banking Committee. In order to meet aggressive sales quotas, Wells Fargo salespersons opened multiple fraudulent credit card accounts and charged customers’ accounts without informing them. Many of these accounts defrauded their existing customers. The committee has now also determined that the fraud is not limited to the banking customers but also has spread to its SBA loan customers. No specifics have as of yet have been given pertaining to the improprieties on the loans that Well has made but did state that about 10,000 customer accounts have been affected.

Last month, Wells Fargo reached a $190 million settlement after employees illegally opened approximately 2 million accounts without the customers’ knowledge. Over 5000 employees were fired as a result. Yesterday, with the revelation of an expansion of the potential fraud to its SBA sector, Wells Fargo chairman of the board, John G. Stumpf abruptly quit, opening the door of speculation as to how far this fraud will reach into the pockets of small business owners as well as taxpayers. Come back to this blog next week for an update on this breaking financial scandal.