- Wells Fargo is shutting down all existing personal lines of credit and has given customers 60 days’ notice of the move, CNBC reported Thursday, citing a six-page letter.
- "In an effort to simplify our product offerings, we’ve made the decision to no longer offer personal lines of credit as we feel we can better meet the borrowing needs of our customers through credit card and personal loan products," the bank told CNBC and Bloomberg in a statement. "We realize change can be inconvenient, especially when customer credit may be impacted."
- The bank, over the past year or more, has been reevaluating its business units as part of a plan to shed $10 billion in annual costs, and is offloading those it sees as non-core.
It is unclear how much Wells Fargo is saving by halting this product. The bank delineates between personal lines of credit and personal loans, but both are included in Wells Fargo’s personal lending book, which accounted for $5 billion as of March, according to Bloomberg.
Jason Goldberg, a bank analyst for Barclays, told CNBC large banks saw an aggregate drop in loans last year for the first time in more than a decade. Wells Fargo saw the steepest decline among the biggest U.S. banks, the publication reported.
Users could borrow between $3,000 and $100,000 through the lines of credit, which offered interest rates between 9.5% and 21% and were positioned as a means to consolidate higher-interest credit card debt, pay for home renovations or avoid overdraft fees on linked checking accounts. Affected customers must make minimum payments on remaining balances at a fixed rate, the bank said.
In a frequently asked questions section of its letter to customers, the bank said the account closures couldn’t be reversed or reviewed. It is unclear how many customers are affected by the offering’s termination, but the bank told CNBC it was "committed to helping each customer find a credit solution that fits their needs."
At least one lawmaker criticized the bank over the move. "Not a single @WellsFargo customer should see their credit score suffer just because their bank is restructuring after years of scams and incompetence," Sen. Elizabeth Warren, D-MA, tweeted Thursday. "Sending out a warning notice simply isn’t good enough — Wells Fargo needs to make this right."
The move comes as the bank is boosting its credit card profile. Last week, Wells Fargo launched 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 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 (HELOC). 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. 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.
The HELOC and auto loan moves stemmed from a concern over credit quality, Wells Fargo said last summer. But the bank is also still operating under a cap that limits its assets at $1.95 trillion. The cap, which the Federal Reserve imposed in 2018 as a result of Wells Fargo’s fake-accounts scandal, has cost the bank upward of $220 billion in market value and $4 billion in lost profits, Bloomberg reported last year.
In an unrelated development Thursday, Wells Fargo announced it has hired JPMorgan Chase’s global head of talent development and Total Rewards to serve as its next head of human resources, effective Oct. 1.
Bei Ling, an eight-year JPMorgan veteran, steps into a role at Wells that, until April, was inhabited by David Galloreese. Prior to her time at JPMorgan, Ling served as deputy director of human resources at PNC.
In a press release, Wells Fargo said Ling will be "responsible for all aspects of the company’s human capital strategy."
The largest component, by far, of Wells’ effort last year to cut $10 billion in annual expenses was a spate of job cuts, resumed in August. That was estimated to absorb tens of thousands of positions.