Elizabeth Warren slams Wells Fargo for ending personal lines of credit — here’s why move could hurt your credit score
Elizabeth Warren has sharp words for Wells Fargo.
The bank is terminating personal lines of credit and will close existing ones in the coming weeks, CNBC reported, citing letters from clients he has reviewed. The bank is under augmented regulatory pressure following recent scandals.
In a “frequently asked questions” section of a letter sent from the back, Wells Fargo warned that deleting these bank accounts could impact customer credit scores. The news comes at a time when Americans are borrowing more money.
“Sending a warning notice is simply not enough.“
Senator Elizabeth Warren (D., Mass.) Reacted quickly and bluntly to the news. “Not one @Wells Fargo the customer should see their credit rating suffer just because their bank restructures after years of scams and incompetence.
“Sending a warning notice is just not enough. Wells Fargo needs to fix it, ”she wrote on Twitter TWTR,
Warren is the former director and founder of the Consumer Financial Protection Bureau.
Wells Fargo WFC,
the soon to be discontinued product involves between $ 3,000 and $ 100,000 in revolving lines of credit, and has been marketed as a way for customers to consolidate higher interest rate credit card debt or avoid overdraft fees on current accounts.
A spokesperson for Wells Fargo told MarketWatch: “As we simplify our product offerings, we made the decision last year to no longer offer personal lines of credit because we believe we can better meet the needs of customers. borrowing from our customers through credit cards and personal loans. some products.”
“We realize that change can be awkward, especially when customer credit can be affected. We offer a 60-day notice period with a series of pre-closing reminders, and we’re committed to helping every customer find a credit solution that meets their needs, ”he added.
Credit utilization ratio
The change could impact customers’ credit utilization rate, a calculation by credit reporting companies of the amount of a consumer’s debt compared to the total amount of credit they have available.
Consumer demand for credit cards, personal loans, as well as auto loans and leases, increased nearly 40% in April over the year, according to data released this week by the company. Equifax EFX credit assessment,
“The problem is specific to Wells Fargo. Basically, they’re in the Federal Reserve’s penalty box because of past regulatory issues, ”said Ted Rossman, senior industry analyst at CreditCards.com.
Wells Fargo faces more stringent asset oversight and caps than its competitors, he said. “I don’t think their decision to exit the personal lines of credit business should be taken as a sign that others will follow suit,” Rossman said.
“They still have to repay the money they borrowed, but the line of credit will no longer be available for further borrowing, which could lead to an increase in their credit utilization rate and a drop in their credit rating. “, he added.
In the throes of scandal
The bank was in the throes of a scandal. Last year Elizabeth Duke resigned as president of her board of directors, days before she was called to testify at a congressional hearing on the fallout from the 2016 fake accounts scandal.
The bank has faced a slew of lawsuits for opening some 2 million savings and checking accounts for customers without their consent. The Justice Department said the program had lasted a decade and involved thousands of bank workers.
Also last year, the bank fired more than 100 employees for allegedly defrauding a federal pandemic program. “These illegal actions were personal actions and do not involve our customers,” the bank said in a note at the time.
An internal investigation found that up to 125 employees made false statements when applying for economic disaster loans, a kind of small business relief loan, the Associated Press reported.
Looking ahead and beyond Wells Fargo, Rossman said he felt a major shift among U.S. lenders, especially credit card issuers. “They are less worried about COVID, jobs and the economy and are looking to grow again,” he said.
“While credit card marketing has been drastically curtailed for much of 2020 and into early 2021, all of a sudden there is stiff competition for consumer businesses as card issuers look to capture the rebound in consumer spending as much as possible. “
“We’re seeing record sign-up bonuses on several credit cards (especially travel cards), and 0% offers on balance transfers and new purchases are becoming plentiful again,” Rossman said.
The low interest rates make it a good time to look into a balance transfer card. “I see 0% offers for up to 20 months. In general, I would say someone with a credit score of 700 or higher is a good candidate for approval, he said.
Americans can hire a financial advisor and / or seek help from a credit bureau. Note the difference between a “debt management” organization and a “debt settlement” company that provides legal and financial services.
The first category includes non-profit organizations that belong to the National Foundation for Credit Counseling, while the second is made up of for-profit businesses. Rossman advises consumers who need advice to seek out first.
Wells Fargo shares on Friday closed 3.7% higher after falling 1.6% on Thursday, and have gained 45% so far this year, while the S&P 500 SPX,
closing up 1.1%. The Dow Jones Industrial Average DJIA,
closed up 1.3% on Friday.