- Wells Fargo has reconsidered its move to discontinue personal lines of credit, according to notifications seen Wednesday by CNBC and Bloomberg.
- The bank is keeping open lines of credit to customers who have been actively using them or want to reactivate old lines, but it will not offer the product to new customers, a company spokeswoman told CNBC.
- “For customers whose accounts have been inactive for the past 12 months, if they would like to keep their lines open, they can call us or simply use their line,” the bank wrote in a statement to the news network. “For those inactive customers who do not activate their lines in one of these ways, accounts will be closed on December 2, 2021.”
Historically, unsecured personal lines of credit (PLOCs) had been an option for borrowers with strong track records. But in recent years, other offerings — such as credit cards, personal and home equity loans, financing options for large retail purchases, and online lending from nonbank competitors — have proliferated.
Wells Fargo stopped opening personal lines of credit in May 2020 as part of a strategic review of its businesses, the bank said. But its announcement last month that it would shutter existing PLOCs generated an outcry from customers and lawmakers alike — in part because reducing a customer’s available financing can hurt their credit score.
"We realize change can be inconvenient, especially when customer credit may be impacted,” the bank wrote to customers last month in a six-page letter giving borrowers 60 days’ notice ahead of account closures.
Sen. Elizabeth Warren, D-MA, tweeted last month that the heads-up was insufficient.
"Not a single @WellsFargo customer should see their credit score suffer just because their bank is restructuring after years of scams and incompetence," she wrote July 8. "Sending out a warning notice simply isn’t good enough — Wells Fargo needs to make this right."
The bank began notifying PLOC customers Tuesday of its reversal. “Based on feedback from our customers (thank you if you provided feedback!) we are adjusting our approach,” John Rasmussen, executive vice president and head of personal lending at the bank, told active customers in an email, according to Bloomberg. “The terms of your account are not changing.”
Wells Fargo has halted other lines of credit over the past year or so. The bank in April 2020 temporarily stopped accepting new applications for home equity lines of credit. It also, in June 2020, said it would no longer accept auto loan applications from most independent car dealerships — a move that cut out about 10% of the 11,000 businesses through which the bank sold auto loans.
And the bank in December agreed to sell its student-loan portfolio worth $10 billion to a group including Apollo Global Management and Blackstone.
Beyond lending, Wells Fargo has sold — or has considered selling — a number of business units it deemed non-core. The bank said in February it planned to sell its asset-management business for $2.1 billion to two private-equity firms. In October, it weighed selling a corporate-trust unit that could have given the bank a $1 billion windfall, according to Bloomberg. The bank held onto its private-label card unit, however.
Last month’s announcement that the bank would shutter existing PLOCs came roughly a week after it leaned more heavily into its credit-card portfolio, launching an offering that gives users 2% cash back on all spending and a 0% annual percentage rate on balance transfers for 15 months.
Wells Fargo’s reevaluation of its businesses may be boosting the market’s confidence in the bank, which has seen its stock jump 59% thus far this year, according to Bloomberg.
Among the bank’s PLOC borrowers, 60% actively used them, while the other 40% hadn’t in the past 12 months, a source told CNBC.