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Wells Fargo is a wake-up call for all bank customers

Last month’s revelation of widespread fraud at Wells Fargo raises many questions -- and not just for the bank’s millions of retail customers.

In September, the Consumer Financial Protection Bureau announced that it fined Wells Fargo (WFC), one of the country’s biggest banks, $100 million for the widespread, illegal practice of secretly opening unauthorized deposit and credit card accounts.

According to the bank’s own analysis, employees opened more than 2 million deposit and credit card accounts that consumers may not have authorized. Wells Fargo employees were motivated by pressure to hit sales targets and receive bonuses, according to the CFPB.

Some customers were tipped off to the deception when they were hit with unexpected fees, got unsolicited credit or debit cards in the mail, or notices from debt collectors about accounts they didn’t recognize. Many of the sham accounts went undetected by customers because the bank’s employees often closed them shortly after opening them.

Wells Fargo scandal may be sign of larger problem

Wells Fargo will pay full restitution to its victims, refunding monthly maintenance fees, insufficient fund fees, overdraft charges and other fees paid because of the phantom accounts. In addition to the CFPB fine, Wells Fargo was hit with other penalties totaling $85 million.

“It is wise for all bank customers to take this as a wake-up call and make sure they have a firm grip on their bank accounts,” said Ken Tumin, founder and editor of bank-comparison site DepositAccounts.com.

According to Tumin, consumers should take several step to guard against sham accounts and to avoid the fees, legitimate or not, that have a way of sneaking up on banking customers.

For starters, it’s a good idea to request a copy of your ChexSystems report, which is essentially a record of your banking behavior. The report, which can be ordered once a year for free, is a tool to spot any fraudulent attempts to open accounts. The information in the report includes a list of inquiries by banks.

“Most banks,” explained Tumin, “review a ChexSystems report when a person applies for an account to make sure they don’t have any red flags in their bank-account history,” like regularly bouncing checks, constantly dipping into overdraft protection and unpaid bills for past-due overdraft fees.

Credit card agreements confusing customers

Consumers who spot inquires they don’t recognize should follow up, said Tumin. “First contact the bank that is listed and determine whether an account was actually opened. Then make sure the institution closes the account” -- and doesn’t try to charge you an early-closure fee, he said. Banks often require customers to keep an account open for a certain number of months, and they levy fees for failing to do so.

Setting up online access to bank or credit card accounts is another good way to monitor for suspicious activity, said Tumin. “When you establish your online access, any accounts that are attached to your name should be visible,” he added.

It’s also a good idea to review your monthly statements, either online or by looking over hard copies that arrive in the mail. Consumers who ignore their monthly statements can easily miss disclosures about new fees or account changes, said Tumin.

Indeed, banking fees can add up quickly and often come as a surprise. That’s because information about them is usually buried in lengthy disclosure statements, said Tumin.

Many banks and credit unions allow customers to set up account alerts that notify them of certain types of transactions or balances that fall below a certain threshold, which can trigger insufficient-fund fees.

How changes to credit-reporting industry affect you

“These are a useful tool,” said Tumin, “to monitor your accounts to make sure you aren’t hit with certain fees, or that there isn’t fraudulent activity on your account.”

In an age of rampant identity theft, checking your credit reports regularly is also important. Consumers can get free credit reports from each of the major reporting agencies, Equifax (EFX), Experian (EXPGY) and TransUnion (TRU), at AnnualCreditReport.com. The reports, which list creditors, come in handy for spotting any unauthorized credit cards or unpaid fees that have been reported to the three agencies.

Of course, if you’re unhappy with your bank or credit card company there’s no stopping you from taking your business elsewhere. Credit unions and internet banks, which have relatively low overhead, tend to be less fee-happy than the traditional players, according to Tumin.

“One way to deal with any problems,” he said, “is to switch to a financial institution that is much more free-friendly or consumer-friendly.”

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