Wells Fargo Didn’t Close Your Personal Line of Credit After All
last month, CNBC first reported Wells fargo And he no longer serves his clients. Weeks after facing public scrutiny by customers and consumer advocates, the bank announced the decision was overturned.
“We are adjusting our approach based on customer feedback (thanks for your feedback!),” Said John Rasmussen, executive vice president of the personal lending business at Wells Fargo. Bloomberg, The outlet reported on Wednesday. “The terms of the account have not changed. “
Why did Wells Fargo overturn this decision?
Wells Fargo did not immediately respond to CNET’s request for comment. Earlier, the Wells Fargo spokesperson said the bank’s decision to shut down personal lines of credit would streamline product offerings to “better meet the borrowing needs of customers through credit cards and products from Personal loan”. He said he was back.
Banks have spent years carrying out turbulent federal investigations. At the end of 2017, the Federal Reserve imposed a cap on bank assets. This effectively prevented the expansion of the bank’s balance sheet. The move came after a study found Wells Fargo employees opened checking and savings accounts without the customer’s knowledge. Account holders were also forced to pay millions in credit and mortgage charges. In February 2020, the bank agreed to pay the United States Securities and Exchange Commission and the Department of Justice a settlement of $ 3 billion. Asset limits are a compliance issueIt has been completely sorted out.
During the 2020 pandemic, and due to restrictions imposed by the Federal Reserve, banks announced that they would suspend the new home equity line of credit and not offer mortgages to most independent car dealers. .. CNBC reported..
In February of this year, the Federal Reserve reviewed Wells Fargo’s proposal to review internal risk management and governance practices and take one more step toward eliminating Federal Reserve sanctions. When asked if asset caps were a factor that no longer provided lines of credit, the Wells Fargo representative said the two issues were unrelated.
Why have consumer advocates opposed the closure of credit accounts?
Wells Fargo acknowledged the inconvenience “especially if it could affect customer credit” in a previous statement announcing the account closure. Consumer advocates have raised questions about the move and its potential impact on customers’ financial stability.
“Customers of @Wells Fargo shouldn’t lose their credit rating just because banks restructure after years of fraud and incompetence,” said Senator Elizabeth Warren. paddy field. Tweeter July 8. “Sending warning notifications is not enough. Wells Fargo has to do it right.
How does the revolving line of credit affect my credit score?
When you close your credit account,By affecting the length of your credit history, especially if your account has been open for several years. It can also affect your credit usage, the amount of debt you owe against your total credit limit. The lower the debt to credit ratio, the higher the credit score. For example, suppose you have three credit accounts.
- Account A: Balance $ 5,000, Limit $ 10,000
- Account B: Balance $ 2,000, Limit $ 10,000
- Account C: Balance $ 3,000, Limit $ 10,000
Dividing the above total debt ($ 10,000) by the total credit limit ($ 30,000) gives a usage of 33%. Now suppose that account C is closed by a bank. When this happens, the total credit limit will automatically decrease to $ 20,000 and credit usage will increase to 50%.
There isn’t much you can do about a bank’s decision to close (or not close) an account, can Protect the rest of your credit report. According to TransUnion, one of the three largest credit reporting agencies in the United States, the best way to minimize credit damage is to keep your old account open and active so that credit conditions are accurately represented. is. We also recommend that you do not charge more than 35% of the total limit for each credit account.
Originally published last month. Updated with new information.