About Wells Fargo
When it comes to assets and deposits, Wells Fargo ranks fourth in the United States, behind Bank of America, JPMorgan Chase, and Citigroup. The financial institution has $1.25 trillion in assets and $848 billion in deposits, and trades on the New York Stock Exchange under the symbol WFC. Wells Fargo likes to romanticize the history of its founding in 1852, using the image of a Gold Rush-era stagecoach in much of its advertising and branding. The early company offered banking, but primarily offered express delivery services. By the early 20th century, Wells Fargo had 10,000 offices across the United States, but its express delivery system was taken over by the U.S. government in 1918. That left a single bank, located in San Francisco. It wasn’t until the 1980s that Wells Fargo expanded its reach from Northern California to the rest of the state, and the 1990s that it expanded across the country.
Like the other major players, Wells Fargo grew to its current size through a process of acquisitions. The latest major acquisition was Wachovia, purchased by Wells Fargo in 2008 after a kerfuffle with Citigroup. In the midst of the economic meltdown, the Federal Deposit Insurance Corporation tried to arrange a shotgun marriage between Citigroup and Wachovia, but Wells Fargo intervened and, after a legal battle, emerged victorious. As a result, the financial institution boasts that it serves one out of every three households in the United States.
Wells Fargo’s Board of Directors includes a plethora of current and former CEOs, including those from Catholic Healthcare West, Portero, Inter-Con Security Systems, Vulcan Materials Company, Sybase, VF Corporation, Pacific Telesis Group, and General Mills. The high-powered group must be effective as the financial giant’s net profits in 2010 were $12.3 billion.
Wells Fargo’s Lending Activities
Wells Fargo made a bundle off of their lending activities in 2010. The report receiving $3.6 million in credit card fees (not interest) and $9.7 billion in mortgage banking fees (again, not interest). At the end of 2010, Wells Fargo held $235 billion in first mortgages, $101 billion in second mortgages, $22 billion in credit cards, and $88 billion in other revolving credit and installment loans. They also offer auto loans, student loans, and personal loans and credit lines.
It’s interesting to note that Wells Fargo (like other lenders) says that they update customers’ FICO scores (credit scores) on a quarterly basis. In their Annual Report, the list the FICO scores of credit care holders, and are quick to say that the figures do not include the scores from credit card holders in what they term “purchased credit-impaired loans,” which is a fancy way of defining the loans they inherited when they purchased Wachovia. At the end of 2010, Wells Fargo carried $2.8 billion in credit card debt from consumers with FICO scores below 600 (the highest FICO score is 850 and the lowest is 300). They use FICO scores to assign loans and credit cards into risk groups, the assumption being that the higher the FICO score, the greater the chance of the loan or credit card being repaid.
How Wells Fargo Handles Past Due Credit Card Debt
According to the financial institution’s 2010 Annual Report, Wells Fargo customers had $22 billion in credit card balances, of which $730 million was between 1 and 29 days past due; $262 million was 30-59 days past due; $207 million was 60-89 days past due; $190 million was 90-119 days past due; and $324 million was 120-179 days past due. Wells Fargo charged off 9.7% of credit card debt in 2010, or $2 billion. Wells Fargo writes credit card debt off as uncollectible when it is 180 days past due. (Auto loans are written off at 120 days, and unsecured loans either 120 days or 180 days past due.)
Wells Fargo and Debt Collection
Wells Fargo has in-house debt collectors, but also sell credit card debt to debt buyers. Its 2010 Annual report lists $101 million “held-for-sale,” or on the market for those wanting to buy consumer debt. When discussing loans resolutions, Wells Fargo says, “Resolutions of loans may include sales of loans to third parties.”
When it comes to selling debt, Wells Fargo’s Annual Report doesn’t appear to separate out credit card debt from other types of loans. However, it does indicate that, in 2010, the financial institution purchased $162 million worth of loans, and sold $553 million worth of consumer debt.
Wells Fargo also “inherited” non-performing loans when they purchased Wachovia. In their 2010 Annual Report, Wells Fargo reported what it termed “purchased credit-impaired loans.” One of the dangers of transferring debt from one financial institution to another or from a financial institution to a debt buyer is that the documentation of amounts owed and payments made can be in a shambles.
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