Wells Fargo Urged to Pause Growth of College Partnerships -- Update
By Melissa Korn and Christina Rexrode
Wells Fargo & Co. is facing new scrutiny over its relationships with U.S. colleges, with a senior Democratic senator urging the bank to pause any expansion of its campus partnerships.
Sen. Dick Durbin (D., Ill.) sent a letter Wednesday asking Wells Fargo to halt any plans it may have to add to its college roster until it has fully addressed a Federal Reserve order last month that curtails the bank's growth. That order, an unprecedented rebuke that sent Wells Fargo shares tumbling, cited the bank's "widespread consumer abuses," which have been unfolding since a 2016 sales-practice scandal.
Mr. Durbin also asked whether the bank has informed student customers of the Fed enforcement action, according to a copy of the letter reviewed by The Wall Street Journal.
Wells Fargo said in a statement that its campus card program -- which allows a student's college ID badge to double as a debit card -- offers benefits to schools and customers. "Wells Fargo has the opportunity to build relationships with customers, and deliver the valuable products, services and education to students that will allow us to serve their needs today and as they change over time," the bank said.
The letter cites a Journal investigation into the relationships between banks and colleges. This found 112 colleges around the U.S. received nearly $18.7 million in fiscal 2017 from banks including Wells Fargo, PNC Financial Services Group Inc. and U.S. Bancorp.
In those agreements, the banks pay hefty royalties to schools in exchange for access to students as prospective new customers. The banks get to set up marketing tables at campus events, advertise their products in mailings to students and are promoted as the school's preferred banking option.
The Journal reviewed more than 150 contracts, as well as newly required disclosures covering account-related fees like overdrafts, finding 22 of the highest 30 average student fees were at schools with Wells Fargo contracts.
"Almost every week we hear new revelations about misbehavior by Wells Fargo -- this time, continuing to charge students high fees for financial products that they aggressively market on campus," Mr. Durbin told The Journal. "Students need to know the real story about this bank."
Mr. Durbin asked the bank "to halt any plans Wells Fargo may have to expand its financial footprint on college campuses," including any plans to expand its offering of financial products. He also asked Wells Fargo to provide a list of all U.S. colleges and universities with which the bank has contracts to offer financial products to students.
Consumer watchdogs say a bank's presence on campus or co-branded marketing materials could lead students to think it is their best or even only option for banking at school.
Banks defend their campus partnerships as a convenience for students, allowing them to link their campus identification cards to banking services. Wells Fargo told the Journal in January that some students incur higher fees because of "more complex banking needs," such as international students who need to move money overseas.
The San Francisco-based bank has struggled to deal with a raft of consumer-related problems, starting with the 2016 sales-practice scandal that resulted in as many as 3.5 million unauthorized customer accounts. Last week, the Journal reported that the Justice Department asked the bank to examine alleged sales problems in its wealth-management business. The bank's foreign-exchange business is also under investigation.
The Fed's order last month barred Wells Fargo from growing past the $1.95 trillion in assets it had at the end of 2017. The Fed also said the bank would replace four board members; Wells Fargo last week named four directors who aren't standing for reelection in 2018.
The Fed said it would restrict Wells Fargo's growth "until its governance and risk management sufficiently improves." Wells Fargo has said it is taking the Fed's order seriously and is confident it will meet its requirements.
Write to Melissa Korn at firstname.lastname@example.org and Christina Rexrode at email@example.com
(END) Dow Jones Newswires
March 07, 2018 11:16 ET (16:16 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.