A pedestrian wearing a protective mask walks past a branch of Wells Fargo & Co. bank in New York, the United States, Thursday, July 9, 2020.
Pierre Foley | Bloomberg | Getty Images
Wells Fargo is ending a popular consumer loan product, angering some of its customers, CNBC has learned.
The bank is closing all existing personal lines of credit in the coming weeks and is no longer offering the product, according to customer letters reviewed by CNBC.
Revolving lines of credit, which typically allow users to borrow from $ 3,000 to $ 100,000, have been touted as a way to consolidate higher-interest credit card debt, pay for home renovations, or pay for home renovations. avoid overdraft fees on linked current accounts.
“Wells Fargo recently revised its product offerings and decided to stop offering new personal line of credit and wallet accounts and close all existing accounts,” the bank said in the six-page letter. The move would allow the bank to focus on credit cards and personal loans, he said.
Wells Fargo CEO Charles Scharf has been forced to make tough decisions during the pandemic, offloading assets and deposits, and pulling out of some products due to limitations imposed by the Federal Reserve. In 2018, the Fed banned Wells Fargo from increasing its balance sheet until it corrects compliance flaws exposed by the bank’s fake accounts scandal.
The asset cap ultimately cost the bank billions of dollars in lost revenue, based on the growth in the balance sheets of competitors such as JPMorgan Chase and Bank of America over the past three years, analysts said.
It also affected Wells Fargo customers: Last year, the lender told staff it was suspending all new home equity lines of credit, CNBC reported. Months later, the bank also pulled out of a segment of the auto lending business.
With its latest ruling, Wells Fargo warned customers that account closings “could impact your credit score,” according to a segment of the letter’s Frequently Asked Questions.
Another part of the FAQ claimed that account closings could not be reviewed or reversed: “We apologize for the inconvenience this line of credit closure will cause,” the bank said. “The closure of the account is final.”
Wells Fargo did not respond directly to questions about the role, if any, of the Fed’s asset cap in its latest move.
The bank made this statement: “In an effort to simplify our product offerings, we have made the decision to no longer offer personal lines of credit because we believe we can better meet the borrowing needs of our customers through credit card and personal loan products. . “
Customers have been given 60 days notice that their accounts will be closed and the remaining balances will require regular minimum payments, the statement said.
This move is odd given the banking sector’s need to stimulate loan growth.
After an explosion in commercial lending in the early days of the pandemic, loan growth has been difficult to muster. Businesses used the money raised in the form of stocks and debt issues to withdraw bank lines of credit, and consumers stuck at home had fewer reasons to use credit cards.
In fact, the big banks experienced the first overall drop in lending in more than a decade last year, according to Barclays banking analyst Jason Goldberg. Of the four largest US banks, Wells Fargo suffered the worst decline.
After banks found borrowers resisted much better than they initially feared, the industry recently began to market new credit cards with large signup bonuses in an attempt to boost lending.
Make the change
Wells Fargo does not disclose how many customers have used the lines of credit it is removing. It had $ 24.9 billion in loans in a category called “other consumers” in March, down 26% from a year earlier.
One client said the change prompted him to switch banks after more than a decade with Wells Fargo. Tim Tomassi, a programmer from Portland, Ore., Said he uses a personal line of credit linked to his checking account to avoid costly overdraft fees.
“It’s a little overwhelming,” Tomassi said in a telephone interview. “It’s a big bank, and I’m a small person, and I feel like they make decisions for their bottom line and not for the customers. A lot of people are in my shoes, they need help. a cushion every now and then awhile from a line of credit.
Tomassi said he plans to open an account with Ally or Chime, banking players that don’t charge overdraft fees.
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