Weeks after Wells Fargo & Co. set off a public outcry over its plan to discontinue personal credit lines, the bank is reversing course.
In recent days, the lender began informing customers who have been using their personal credit lines that the financing channels will remain available. People who haven’t used their accounts since October also will be given the option of keeping them open, according to notifications seen by Bloomberg.
“Based on feedback from our customers (thank you if you provided feedback!) we are adjusting our approach,” John Rasmussen, an executive vice president who oversees Wells Fargo’s personal lending business, wrote to active customers in an email seen by Bloomberg. “The terms of your account are not changing.”
Wells Fargo’s announcement last year that it had stopped accepting applications for personal credit lines went unnoticed in an era in which the vast majority of consumers have come to favor other options — such as credit cards and personal loans — for rainy-day financing and big-ticket purchases. But when the bank tagged the remainder of that business for closure and began notifying clients, borrowers took their complaints public last month, triggering fresh scorn from Capitol Hill.
One reason: Reducing a customer’s available financing can hurt their credit score.
“Not a single @WellsFargo customer should see their credit score suffer just because their bank is restructuring after years of scams and incompetence,” Senator Elizabeth Warren wrote on Twitter at the time. “Sending out a warning notice simply isn’t good enough — Wells Fargo needs to make this right.”
The bank is giving inactive credit-line customers until the end of November to either use their accounts or tell the lender that they want to keep them open, according to a copy of a letter seen by Bloomberg. The firm is still in the process of notifying some account holders.
The unsecured revolvers were offered mostly to borrowers with strong track records. But those people now have numerous other options, including credit cards with competitive rewards programs, an army of online lending platforms, personal and home equity loans, and financing for larger purchases that retailers and dealers sometimes provide at 0% interest rates.
Under Chief Executive Charlie Scharf, Wells Fargo has been exiting businesses deemed inessential with the goal of simplifying operations and improving profitability after years of scandals. That discipline has helped send the bank’s shares up 59% this year.
But, as it turned out, the personal credit lines remained a favored source of financing for some longtime customers.
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Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.