Wells Fargo will be discontinuing existing personal lines of credit over the next few weeks. Neither will the bank offer the credit product to new account holders.
The San Francisco-based enterprise usually issued from $3,000 to $100,000 of revolving credit to qualified clients. The product was often pitched to credit card consumers as a way to consolidate high-interest cards or to help pay for home remodels. The bank also formally sold the idea to banking consumers who wanted to avoid potential overdraft fees on checking accounts linked to the line of credit.
The bank sent out six-page letters to its consumers notifying them of the upcoming account closures. Wells Fargo has warned customers that the closures could impact their credit scores.
Part of the letter reads, “Wells Fargo recently reviewed its product offerings and decided to discontinue offering new Personal and Portfolio line of credit accounts and close all existing accounts.”
The letters also went on to say that the bank wants to focus on personal loans and credit cards. “In an effort to simplify our product offerings, we’ve made the decision to no longer offer personal lines of credit as we feel we can better meet the borrowing needs of our customers through credit card and personal loan products.”
The letters give customers a 60-day notice concerning the account closures and state that customers will still have to make regular minimum payments on their accounts, which are offered at a fixed rate. Initially, some of the credit line accounts were issued with variable interest rates of up to 21 percent.
Charles Scharf, CEO of Wells Fargo, has made several complex decisions during the COVID-19 pandemic. The bank has moved away from offering some of its usual products due to Federal Reserve restrictions. It has had to offload some of its assets and deposits, as well.
The Reserve barred Wells Fargo in 2018 from further gains on its balance sheet until the bank resolves compliance issues uncovered by the fake accounts scandal that plagued the bank. This has cost Wells Fargo billions in lost revenue. Meanwhile, according to analysts, rivals like Bank of America and JPMorgan have added billions to their balance sheets.
After sending out the letters, a spokesperson from Wells Fargo added, “We realize change can be inconvenient, especially when customer credit may be impacted.” The bank is “committed to helping each customer find a credit solution that fits their needs.”
The bank hasn’t disclosed how many customers will be affected by the credit line shuttering. But, as of March, Wells Fargo had nearly $25 billion in loans under a category it labeled “other consumer.”
The bank has said the account closures are final.