Every Big Bank Opens Credit Cards For Customers Without Their Knowledge

The Consumer Financial Protection Bureau is fining and disgorging Bank of America for, among other things, opening credit card accounts for customers without their knowledge.

The practice seemed especially widespread at Wells Fargo in a 2016 scandal. However this happens at every bank. Here is Matt Levine in his indispensable Money Stuff.

What percentage of big banks do you think have opened credit cards for customers without those customers’ consent? Is the answer “all of them”? That seems like a reasonable guess? If you are a big bank, you probably want customers to open more credit cards, because credit cards are usually profitable for you.

So you probably give your employees some incentive to sell credit cards: perhaps explicit incentive payments, or “you will be fired if you don’t sell 100 credit cards,” or perhaps subtler pressure in the form of praising people who sell lots of credit cards.

And if you are a big bank you have thousands of employees in this credit-card-selling business, and surely some of them will think “hey, if I just fill out the form for this confused customer to open a credit card, he’ll get a credit card and not even notice; it won’t cost him anything or make the bank any money, but I’ll get credit for selling another credit card.”

From the bank’s perspective, most of its credit cards will be opened by people who want them and use them, and are lucrative, but some won’t be. And some of those will be what you’d call “fake accounts.”

This is probably ok. You want to create systems that are flexible enough for bank employees to be helpful to people, and to let them open credit card accounts. You could build systems that were cumbersome to the customer. There might be mountains of paperwork to go through, identifying every past address you’ve ever had and every outstanding loan reflected on your credit report. Of course those often contain errors. You’d make it harder for a bank employee to erroneously open a card account, but also make it hard for consumers to open one they want also.

At some banks the controls may have been insufficient, and too many fake accounts were opened for real customers, to earn bonuses or other incentives for employees. But, as with all things, the optimal amount of fraud is not zero.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I disagree, I was brought up to understand this is fraud no matter how much lipstick you try and put on a scheme. They should be found out, fired and not be eligible for rehire in the financial industry. As a society we now have excuses for every wrong doing but this is still f r a u d.

  2. Not going to defend Wells, they obviously have/had a corrupt culture with completely inappropriate incentives but to just make a blanket statement that all banks do this is horseshit.

    I’ve worked at small S&Ls, mid-sized regionals and one of the largest banks in the world. If anybody pulled that kind crap at on of those places they would be terminated on the spot.

    Of course there can be somebody not following the rules at any company with 1000s of employees but to imply that everybody does it and/or it’s tolerated somehow is just wrong.

  3. Paul, you’re right, it’s fraud, and should be punished as such. But in retail, the optimal rate of shoplifting (or employee theft) is rarely zero. And it applies here, too. Probably. Meaning not that theft or fraud is good (It’s bad morally and economically), but rather that the cost of driving it to zero would far outweigh the benefit of zero theft. E.g., strip searching both your customers and employees on exit would probably reduce theft, but would have an effect on repeat customers.

  4. About 20 years ago, I had a live credit card sent to me by my very large bank (one long since subsumed by another bank). I had most definitely not applied for it, as I keep my credit cards to a minimum – I only have two and have always considered them a convenience, and so pay them off in full every month.

    Worried that I had been targeted with identity fraud, I called the national number for the bank. It took about 45 minutes, but I finally landed with a rep who figured out that it was part of a batch order sent from a branch that I’d visited about 10 days before. All I had done was deposit a check via the drive-through – it wasn’t my usual branch, I didn’t even get cash back, and had barely interacted with the teller.

    When I went down to the branch to follow up, the branch manager then tried to tell me that of course I had applied for the card – I had just forgotten! I mean, obviously I wanted another credit card to go shopping! (I don’t think he expected my very angry response to that statement…)

    I was told that the software for every teller interaction had a pop-up box that asked if the customer wanted a credit card, and apparently my drive-thru teller had “accidentally” clicked “Yes”. I took that with an entire shaker of salt, switched banks as soon as possible after that, and sent a report to the various regulatory agencies at the State and Federal level…who did precisely diddly-squat. (And it’s why I love my credit union – much less BS like this.)

  5. I think Matt Levine is full of crap and I will continue to think that way until he makes a case based on facts that are good in a court of law. I have plenty of credit cards and check my credit reports and FICO scores regularly. Adding credit cards lowers your credit score and getting rid of them does the same thing. Banks slamming customers with new credit cards will sooner or later get regulatory complaints due to this.

  6. While there are some that won’t accept reality Greg is right–you do not want to stamp out all fraud or other such theft because the cost of doing so is way higher than accepting that there will be some.

  7. As far as Wells is concerned I had no business credit in 1990’s. Wells sent me an application, denied a credit line, but a week later a Wells credit card and $50,000 line appeared magically. Best thing that ever happened to my credit, and the line they gave me could be opened with checks at 18% APY, but could be paid off before the check ever cleared, so financing for a couple of days ways always free!

    Thank you so much for “screwing” with my credit Wells!!

  8. This is just another Bilt-shilling post in disguise, trying to make Wells Fargo look good when everyone knows they’re a dumpster fire. I’m a Bilt cardholder and dealing with Wells for the product has been a complete and utter disaster for the multiple issues I’ve encountered.

  9. This makes no sense, im a Bank of America employee and it does not good to us to just open a credit card that wont be used. We get credit once the customer uses the actual credit card and we have 60 days for that client to use the credit card, beyond that time we loose out on any available usage incentive. If anyone was doing this that was stupid. The culture at Bank of America is that of building relationships with clients and deepening and uncovering any additional needs. At least at the financial center level or remote level the standard is the same we get credit for usage not just simply applying.

  10. Chase is the worst about this. Over a decade they opened credit cards for my elderly father five times without his consent. He had severe dementia and couldn’t speak They would not close the cards without paying their annual fee. Years after his death Chase still send him credit card offers but no more cards.

  11. I am often the “Nobody” as in “Nobody has complained about that before”! When you are there complaining and they tell you that. It is to try to keep you from filling out a complaint with a real name attached. I tell them – Well, I’m here and I am complaining about this issue. Any business, not just a bank, a credit union, etc.

  12. @Annonymous:
    > This makes no sense, im a Bank of America employee and it does not good to us to just open a credit card that wont be used. We get credit once the customer uses the actual credit card and we have 60 days for that client to use the credit card, beyond that time we loose out on any available usage incentive.

    That’s doing it right. Unfortunately, an awful lot of businesses use poorly thought out metrics. Put a lot of importance on a metric that can be gamed and it will be gamed.

  13. From my wife’s experience working at BOA was a “snake pit”. You had quotas but branch managers would route promising customers that wanted to open business accounts or credit cards to favored Associates. You could spend hours with a customer sorting out a bank snafu or helping with family estate issues, name changes for trans persons, etc. These counted for nothing. Weekly calls with regional management would have you berated for ‘not helping the customers’ which was code for not selling stuff.

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