Why Wells Fargo reversed itself and will now keep personal lines of credit after all
Wells Fargo has dropped its plans to shut down personal lines of credit, the bank confirmed Thursday.
The bank had informed customers last month that it had stopped offering the lines of credit and would close existing accounts to simplify its product offerings. But the bank’s about-face followed backlash from customers and members of Congress alike.
“We heard feedback from our customers and that feedback is very important to us,” Wells Fargo said in a statement to the Observer. “We are responding by ensuring customers can keep these lines of credit open.”
A personal line of credit differs slightly from a personal loan. With a personal loan, borrowers receive the principal amount and pay it off in regular increments with a fixed interest rate over a set payment period. A personal line of credit, similar to a credit card, is more flexible and has a variable interest rate.
Customers who had their personal lines of credit close would have likely taken a small hit to their credit score.
Last month, Sen. Elizabeth Warren, D-Mass., took to Twitter to decry Wells Fargo’s initial decision and its potential impact on account holders.
“Not a single @WellsFargo customer should see their credit score suffer just because their bank is restructuring after years of scams and incompetence,” she wrote. “Sending out a warning notice simply isn’t good enough – Wells Fargo needs to make this right.”
Wells Fargo previously said it would discontinue and close the accounts to focus on other lending products, like personal loans and credit cards. The bank gave customers a 60-day notice of the planned closures, CNBC reported.
Wells Fargo will no longer offer the product to new customers, but account holders who have been using their lines of credit will now be able to keep their accounts open.
Customers who haven’t used the credit lines in the last 12 months can call the bank or use the line of credit to keep their account, the bank said. Otherwise, inactive accounts will be closed Dec. 2.
The bank’s reversal was first reported by Bloomberg.
Wells Fargo has been under strict regulatory scrutiny — and a federal asset cap — in recent years after the fallout of its fake accounts scandal in 2016. The bank is one of the largest deposit holders in Charlotte, and employs more than 27,000 in the area.
This story was originally published August 19, 2021 at 2:03 PM with the headline "Why Wells Fargo reversed itself and will now keep personal lines of credit after all."
