Wells Fargo, the bank serving one in three households in the United States, is shuttering all personal lines of credit, according to customer letters reviewed by CNBC. The revolving credit lines-a popular product which will be shut down in the coming weeks, typically let users borrow $3,000 to $100,000.
“Wells Fargo recently reviewed its product offerings and decided to discontinue offering new Personal and Portfolio line of credit accounts and close all existing accounts,” the San Francisco-headquartered lender said in the six-page letter.
Customers have been given a 60-day notice that their accounts will be shuttered, and remaining balances will require regular minimum payments. The move by the Wall Street giant, leaving many customers without what may be a critical source of liquidity, “may have an impact” on their credit score, according to a Frequently Asked Questions segment of the letter.
“We apologize for the inconvenience this Line of Credit closure will cause,” the bank said. “The account closure is final.”
According to CNBC, Wells Fargo CEO Charles Scharf “has been forced to make difficult decisions” during the Covid-19 crisis, including “offloading assets and deposits” and stepping back from some products because of restrictions imposed by the Federal Reserve a few years ago.
In 2018, the US central bank barred Wells Fargo from growing its balance sheet until it fixes compliance shortcomings revealed by the bank’s fake accounts scandal whereby branch managers created millions of fraudulent savings and checking accounts without the clients consent.
Last year, the lender told staff it was halting all new home equity lines of credit, it also withdrew from a segment of the auto lending business and curtailed consumer credit, at a time when many were unsure about the remaining purchasing power of the consumer.
“The timing of this latest decision is so curious. As Treasury yields drop, signaling unease about the trajectory of the global post-pandemic recovery, amid nervousness about a potential Fed rate hike before the end of next year, is the bank simply engaging in some prudent risk-management while using the Fed’s balance-sheet order as an excuse?” ZeroHedge wrote on Thursday (July 8).
Here are some comments from Reddit users who reacted to the latest news:
One said “Is this why Warren Buffett sold a few months back?” Another Redditer wrote “So it begins” A third one made a statement: “There are three ways to make a living in this business. Be first, be smarter, or cheat.”
NYSE-listed Wells Fargo with $1.92 trillion in assets was founded in 1852. It provides banking, investment and mortgage products and services, as well as consumer and commercial finance through more than 7,200 locations, more than 13,000 ATMs, the internet and mobile banking and has offices in 31 countries and territories.
Wells Fargo & Company was ranked No. 30 on Fortune’s 2020 rankings of America’s largest corporations.