Wells Fargo and How Not to Make Customers Happy

An associate of mine forwarded me an article regarding a recent ruling against Wells Fargo regarding overdraft fees. The essence of the complaint was as follows:

In 2001, Wells Fargo, the largest U.S. home lender, changed the way it treated daily debit transactions and cash withdrawals so that transactions with the highest dollar amount posted first, rather than in the order they occurred, according to the complaint. The practice, allegedly intended to boost revenue from overdraft fees, led to customers overdrawing accounts by small amounts multiple times a day, according to the complaint.

The reason this ruling was of such interest to my associate was because his own bank does the same thing. His transactions are put into effect by size, which he has been able to demonstrate by watching the order of the posting of the transactions change shortly after they first appear in his account history.

The explanation from Wells Fargo is that this practice was put into place for the benefit of the consumer, in that by having the largest transactions complete first, the likelihood of a significant withdrawal causing overdraft (e.g. mortgage or car payments) is reduced.

Whether or not Wells Fargo’s decision to implement such a transaction policy is actually based on improving customer service (as opposed to finding a way to increase fees to users as was claimed against them) is not the point of this article. What is the point is that by claiming this as the reason for the practice, the bank has implied that their policy is set by people completely detached from the reality of how people use banks, or by people incredibly stupid.

When a person makes a series of transactions, their assumption is that they will be completed in the order they were made. If this causes multiple overdrafts to be incurred, that is the problem of the account owner. If the bank really wanted to help out customers, the only transactions they would process out of order would be to do all deposits prior to doing the withdrawals (thereby reducing the chance of an overdraft fee being incurred).

Second, to truly help customers not incur overdrafts, the Wells Fargo might have looked at the number of overdraft fees incurred as a result of performing the transactions in chronological order, and compare it to the number of fees incurred were the transactions to be processed in the order of magnitude. Only then should a reordering of the transactions occur, if doing so would reduce the number of fees incurred by the customer.

What does this mean to you?

Simple – when trying to make a decision on behalf of a client for their benefit, don’t make assumptions about what the customer would rather have you do, but instead, do what the customer would assume you would do. If you don’t truly understand the impact of deviating from the expected behaviour, then don’t deviate.

When you change from the expected, be sure you understand the ramifications, or you can find yourself, like Wells Fargo, sitting in court defending your practice.