SAN FRANCISCO–Wells Fargo has announced plans to end some of its existing personal lines of credit over the next few weeks, and no longer offers the product. The announcement has reportedly angered many customers, especially those who use the product for overdraft protection.
Wells Fargo’s credit lines, which typically let users borrow $3,000 to $100,000, were pitched as a way to consolidate higher-interest credit card debt, pay for home renovations or avoid overdraft fees on linked checking accounts, noted CNBC, which reviewed letters sent to Wells Fargo’s customers announcing the termination of the offering.
According to CNBC, customers have been given a 60-day notice that their accounts will be shuttered, and remaining balances will require regular minimum payments at a fixed rate, according to the statement. When it was offered, the credit lines had variable interest rates ranging from 9.5% to 21%.
"Wells Fargo recently reviewed its product offerings and decided to discontinue offering new Personal and Portfolio line of credit accounts and close all existing accounts," the bank said in the six-page letter, according to CNBC.
The move will allow Wells Fargo to focus on credit cards and personal loans, the letter added.
Still Operating Under Cap
The move also comes as the bank continues to operate under a rare cap on growth imposed by the Federal Reserve in response to numerous scandals, including the widespread opening of fake accounts for customers as employees scrambled to make goals that had been set for them.
Wells Fargo has also earlier announced it would not make any new home equity loans, and it also exited a segment of the auto lending market.
In its most recent move to get out of personal lines of credit Wells Fargo has warned its customers that the account closures "may have an impact on your credit score," according to a frequently asked questions segment of the letter, CNBC added.
The report further noted the FAQs also assert that account closures couldn't be reviewed or reversed.
Bank’s Statement
In a statement, Wells Fargo said, "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."
CNBC said that after its initial report aired, a bank spokesperson commented, “We realize change can be inconvenient, especially when customer credit may be impacted” and that the bank is "committed to helping each customer find a credit solution that fits their needs."
Wells Fargo has not disclosed how many customers used the credit lines it is eliminating. CNBC said its review found the bank reported $24.9 billion in loans in a category called "other consumer" as of March, which was 26% lower than the year-earlier period.
‘Unintended Consequences’
In response to the Wells Fargo announcement, John McKechnie, a senior partner with the Washington advocacy firm Total Spectrum, said, “This is the law of unintended consequences, writ large. Overdrafts and related issues seem to be moving out of the governmental sphere and into the realm of the PR marketplace, and I think this opens the door for credit unions to re-emphasize how a transparent and fully-disclosed ODP program can help consumers manage their finances. ODP never was the bogeyman of the ‘$35 cup of coffee’ fable, and I’m afraid the endgame will be fewer options for consumers who need more and better ones.”