Wells Fargo & Company agreed to pay New York State $65 million in penalty due to its misconducted related to its cross-sell business model.
In its investigation, the New York Attorney General’s office found that Well Fargo made fraudulent statements to investors regarding its cross-sell strategy and cross-sell metrics. Its action violated the Martin Act, Executive Law, and the common law of the State of New York.
Cross-sell is the process of selling additional financial products and/or services to existing customers. Wells Fargo told investors that it is using the strategy to satisfy its customers’ financial needs and to increase its profits.
However, Wells Fargo failed to disclose to investors that it implemented strict and unrealistic sales goals. As a result, its employees in the Community Bank division engaged in sales practice misconduct. They opened around “3.5 million possibly fraudulent deposit, credit and line of credit accounts without the knowledge or consent of its customers,” according to the New York Attorney General’s office.