Wells Fargo Kills Customers' Personal Lines of Credit After Announcing $18 Billion in Buybacks
Less than two weeks after announcing a doubling of its dividend and plans to buy back $18 billion of stock, Wells Fargo said that it is terminating its customers’ personal lines of credit, CNBC reported Thursday.
The personal lines of credit offered customers $3,000 to $100,000 in revolving credit lines. They were sold to customers as a way of consolidating more expensive credit card debt and a way to avoid overdraft fees on checking accounts.
“As we simplify our product offerings, we made the decision last year 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 said in a statement to Breitbart News.
Wells Fargo continues to be in the Federal Reserve’s penalty box. After it was discovered that the bank had opened thousands of bogus accounts for customers, the Federal Reserve put in place a consent order that prevents Wells Fargo from growing its balance sheet above $1.95 trillion in assets. As a result, the bank has had to sell assets and end product offerings in order to stay below the asset cap. When assets Well’s owns, such as home loans or Treasuries, increase in value, Wells can be forced to shed assets.
It’s very likely the inexpensive personal lines of credit were meant to make banking with Wells more attractive but did not produce much interest revenue.
“We realize change can be inconvenient, especially when customer credit may be impacted. We are providing a 60-day notice period with a series of reminders before closure, and are committed to helping each customer find a credit solution that fits their needs,” a spokesman for Wells said.
Many banks are also awash in deposits thanks to the Fed’s bond buying, stimulus checks, and huge federal government budget deficits. This has made them less eager to attract customers for deposit accounts and other low-revenue services.
Wells declined to say whether the end of the lines of credit were related to the Fed asset cap. It did not comment on whether the termination of the loans was related to their profitability when compared with credit cards.
Wells said at the end of June that it was increasing its dividend from 10 cents to 20 cents per share. The bank plans to buy back $18 billion in stock over the next year, it said in a statement. That buyback plan would also consume all of Wells Fargo’s forecasted profits, with analysts expecting the bank to earn around $15.7 billion this year, according to FactSet.
—The Associated Press contributed to this report.