Wells Fargo waives revolving credit facility
Wells Fargo has decided to end its revolving customer credit facility and will also close existing ones in the coming weeks.
“Wells Fargo recently revised its product offerings and decided to stop offering new personal line of credit and wallet accounts and close all existing accounts,” the bank said in a six-page letter to customers. .
Customers of the bank have 60 days after notice before their accounts are closed, with remaining balances requiring regular minimum payments at a fixed rate, according to CNBC. A Wells Fargo spokesperson said in a statement: “We realize that change can be awkward, especially when customer credit can be affected,” adding that he was “committed to helping every customer find a solution. credit that meets their needs “.
The lines of credit were offered at variable interest rates ranging from 9.5% to 21%.
Revolving lines of credit typically lend between $ 3,000 and $ 100,000 to users and are a way for customers to consolidate higher interest credit card debt or avoid overdraft charges on current accounts.
Banks have said that in the future they intend to focus on credit cards and personal loans.
Wells Fargo also warned customers in the letter that account closings “could impact your credit score.”
The Federal Reserve banned the bank in 2018 from increasing its balance sheet until it resolves compliance issues resulting from the bank’s fake accounts scandal.
Wells Fargo has already stopped home equity lines of credit and auto loans at most independent auto dealers.
Wells Fargo has faced many challenges due to the growth cap and additional issues from the coronavirus pandemic. Wells Fargo CEO Charles Scharf got rid of the assets and made sweeping changes to the bank’s lending products.
Compared to the balance sheets of competitors such as JP Morgan and Bank of America, Wells Fargo has lost billions of dollars due to restrictions imposed by the Federal Reserve.
But stopping lending at this crucial time seems odd, analysts say. Loan growth has been hard to come by in these difficult times during the pandemic, when businesses raise money to clear their credit debts and consumers stuck at home have less reason to use credit cards.
The big banks recorded a decline in lending for the first time in a decade in 2020. Among the four largest US banks, Wells Fargo saw the worst decline. But 2021 has seen some recovery, as the economy has weathered the ravages of the coronavirus better than expected. The banking industry has started to personalize credit cards with bonuses in an attempt to boost lending.
Wells Fargo has not disclosed the number of accounts it is closing. As of March, it had $ 24.9 billion in loans in the “other consumers” category.
Customers told CNBC they would switch banks if they were no longer offered the revolving credit facility. They were not happy with the withdrawal of this cushion and fall back on overdraft fees and other credit debts.