Last Updated on July 3, 2025 by The HD Post Staff
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
