UC Davis report finds $3 billion Wells Fargo scandal drove borrowers to fintech lenders

Published on

 

CALIFORNIA – A UC Davis researcher published a report, July 3, finding that the 2016 Wells Fargo financial scandal eroded consumer trust in traditional banks and pushed homebuyers toward fintech mortgage lenders.

Wells Fargo was fined $3 billion over allegations that bank employees, under pressure to meet unrealistic sales goals, had opened millions of accounts and saddled customers with fees “under false pretenses and without consent” between 2002 and 2016. 

The bank admitted to collecting millions in improper fees and harming some customer’s credit ratings. It unlawfully misused customers’ sensitive personal information, including customers’ means of identification.

UC Davis professor Keer Yang said areas more exposed to the Wells Fargo scandal were more likely to choose fintech mortgage lenders.

Interest rates and fees for 30-year fixed loans stayed the same between banks and fintech after the 2016 scandal.

“Therefore it is trust, not the interest rate, that affects the borrower’s probability of choosing a fintech lender,” Yang wrote.

Fintech use rose 8% in 2016

Fintech, short for financial technology, enables consumers and businesses to manage finances digitally.

Yang analyzed trust surveys, Google Trends, news articles, and loan data from 2012 to 2021 to measure the scandal’s impact on bank and fintech use.

Fintech use rose from 2% in 2010 to 8% in 2016, according to the study.

In areas with Wells Fargo banks, customers were 4% more likely to choose non-bank lenders after 2016.

The scandal had a minimal effect on bank deposits, probably because of protections afforded by deposit insurance, Yang said.

To read the full report visit https://www.sciencedirect.com/science/article/pii/S0304405X25000704

RELATED: Bill that would allow inactive crypto wallets to be seized as unclaimed property passes CA Assembly

spot_img

Latest articles

Sen. Josh Hawley introduces $600 tariff rebate bill

Senator Josh Hawley (R-Mo.) introduced the American Worker Rebate Act, proposing rebate $600 checks...

California court sentences AML Bitcoin founder to 7 years for $10 Million fraud

CALIFORNIA – The U.S Department of Justice (DOJ) announced that cryptocurrency CEO Rowland Marcus...

Americorps California reopens recruitment for paid service roles

CALIFORNIA – California Volunteers has resumed AmeriCorps recruitment after federal cuts sidelined thousands of...

P&G to raise U.S. prices on 25% of products amid tariff pressures, cut 7,000 jobs over two years

Procter & Gamble (P&G) announced July 29 that it plans to raise prices on...

More like this

P&G to raise U.S. prices on 25% of products amid tariff pressures, cut 7,000 jobs over two years

Procter & Gamble (P&G) announced July 29 that it plans to raise prices on...

California Competes $308 Million tax credit application window open

CALIFORNIA – The California Competes Tax Credit application period is now open until August...

Poppi settles $8.9 Million false ad lawsuit in California – consumers can file claims

CALIFORNIA – VNGR Beverage, LLC, maker of Poppi drinks, has agreed to an $8.9...