What is the deal with Well Fargo canceling all personal line of credits that recently announced?
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For those who are talking about using LOC to consolidate card debt, the vehicle for this is really the personal loan - not just at wells, but in the marketplace overall.
Line of Credit has been a troubled product for some time now, and not just with WF. The fintechs shaking up the personal lending industry are doing loans - not lines.
this has been in the works since before Covid. They stopped marketing it, then stopped taking new applications... shutting down the portfolio is the last step.
Its wells fargo kicking regulators in the dik and reminding them the bank is unhappy with asset cap.
Similar to when fed restricted stonk buy backs, banks pushed lending standards so extreme only rich people or people with steller credit got loans.
Chuck is an arrogent pr!ck. This is him protesting against OCC cap. The victims of course, as always, are little people.
They are playing defense. I’m betting WF is anticipating an economic crash and they are eliminating exposure to defaults on unsecured debt. Back in 2008 many plenty of banks got hit… they won’t let that happen again.
One of the best and most popular ways to use a personal loan or line of credit is to pay off higher-interest credit card debt.
WF never mentions that in the marketing to avoid cannibalizing the CC business. Because, you know, if we don’t tell our customers how to manage their money they’ll never think of it themselves. At least that was the reasoning.
But they must have figured it out.
We just introduced two new credit cards. We must support the credit card business at all costs. We want people racking up debt and making those minimum payments, not paying off their cards with lower interest products.
Even if they do just start using their cards again once they’re paid off. But that’s a different subject.
In the immediate term the answer is get rid of the personal lines of credit.
WF slowly circling the drain.
Follow the logic
Our expense ratio is insane high, we likely spend 3X what they spend at other banks for Risk functions.
New management starts demoting and laying off Americans and replacing in India to save on expenses.
Management starts avoiding anything that could be risky at all to avoid issues with regulators. They are also on the hunt for higher margin NIM products like Credit Cards.
Yeah end of day Politicians have just hurt American workers in the most brutal of ways.
No, they don’t have to pay immediately, they basically got a term with a fixed rate and payoff date. It’s just like a loan.
The reason why? Maybe WF sees something over the horizon. Personal LOC’s are a higher risk since it’s easy access to cash. There’s no collateral either.
With our asset cap, it makes sense to use that volume for better revenue options.
So what did WFC do with those loans? Did we ask them to pay in full asap or else?
We honestly do not know. Its an odd thing to yank from the market since deman is so high right now.
The only things that make sense to me are a new better structure line or prep for a sale, but honestly neither make sense.
Maybe the underwriting was poor and the prpduct was a loss leader, but even then ypu just manage it better, not gut it.
WFC looking to get out of the banking business.