The Wall Street Journal has reported on yet another incentive mishap at Wells Fargo. This time, the bank, which had to let 5300 employees go for creating false or unauthorized accounts in order to earn incentives in the retail side, had a currency incentive plan that found the traders just making fees up. The higher the exchange fees earned, the higher the currency traders’ bonuses.Customers who questioned the size of their currency exchange fees were told of the “time fluctuation rate.” The “time fluctuation rate” was a rate that occurred only at the exact moment of the customer’s currency trade. It was the darnedest thing — the rates went up for customers only at the time they needed to make trades. Also, the rates were “fluctuating in time” even when the customers had signed agreements for their exchange rates.
The currency exchange customers of Wells were not involved in large trades and tended to not look closely at their transactions. When they did and complained, the bank made adjustments to quell rebellions. Restaurant Brands International, the owner of Burger King and other chains, received a $900,000 refund on its fees when it complained. The events became known as “the Burger King trade” within the bank.
The problem with the fees, like the problems with the fake accounts, went on for at least a decade at the bank. In the San Francisco currency exchange office, employees rang a big brass bell when a big trade went through. In one meeting, an employee expressed her concerns that the bell-ringing was not appropriate for celebrating high fees to customers. She was reprimanded, told that her conduct was offensive and unprofessional, forced to apologize to her managers, and demoted. She later left the bank. She was right to speak up and right to leave the bank.
The Wells currency exchange division has had extensive changes since October and employees there had to participate in compliance training. Internal and federal investigations are pending. If I were on the board or an executive at Wells, I would start looking at every bank operation. Start with incentive plans in every area and proceed from there.