Corporate treasurers must now become more vigilant than ever in monitoring the inventory of bank accounts, the services and volumes their banks are claiming were used, and the rates applied to these volumes, each and every month, write Daniel Gill and Tamir Shafer.

A few days ago, we learned that the Consumer Financial Protection Bureau (CFPB) levied the single biggest fine in its history ($100 million) to Wells Fargo for fraud. In all, Wells Fargo is paying fines totaling $185 million – without admitting guilt – related to this fraud. These fines were caused by the improper opening of checking accounts and credit cards. In other words, bank personnel were opening up accounts for their clients, without their clients’ permission, in order to meet sales volume goals to trigger compensation incentives. Over 5,300 employees were fired due to their actions associated with this activity.

Apparently, the pressure and incentives were high enough to cause more than 5,000 people – in a single company – to commit this fraud.  Without knowing all of the specifics of the incentive-based compensation structure or the required sales goals, it speaks to just how hard it must be to be a successful retail relationship manager in an environment such as this. Stories are now coming out about the intense pressure to sell more products, including the internal bank slogan of “Eight is Great!” referring to the target of having each retail client of the bank owning eight different bank products at a minimum.

The CFPB, acting on behalf of regular consumers, is doing precisely what its mandate sets out for it do: “To make sure that banks, lenders, and other financial companies treat you fairly.”

While this situation is an excellent example of why this type of regulated authority is needed to protect consumers, it is important to note that there is no comparable regulated authority to protect corporations in the same way, from the various revenue generation tactics employed by banks.

While we don’t know at this point if there were any fraudulent accounts opened on behalf of corporate clients of Wells Fargo, nor do we know if any additional services were added to corporate accounts, this incident and those that are sure to follow speak volumes about the culture that we are dealing with.  While every corporate treasury department needs to be diligent in negotiating the most effective banking relationships with each of their banking partners, it cannot end there.  Corporate treasury must now become more vigilant than ever in monitoring the inventory of bank accounts, the services and volumes their banks are claiming were used, and the rates applied to these volumes, each and every month. Given the number of banks, services, accounts and data we are talking about, being vigilant without using state of the art tools or expert advisors is nearly impossible.

Part of Redbridge’s responsibility, and incumbent as part of our Hawkeye service, is to do just that: monitor our clients’ monthly commercial bank fee invoices. Over the last several years, we have seen billing violations and errors that average $54 for every $1,000 in fees levied by commercial banks. That’s more than 5%. These billing violations and errors typically stem from:

  • Services added without approval from the client;
  • Bank accounts not closed timely;
  • Unapproved price increases on certain services; and
  • Reductions in yield.

In some cases, these billing mistakes are explained away fairly; in many others, our clients are left to push their relationship managers to retrieve credits from their banks,  as their banks have already auto-debited the bank account for these fees owed, including these billing violations.

Who is monitoring your commercial bank accounts and looking out for you?

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