Wells Fargo Cuts Personal Lines of Credit: Senator Warren Talks About ‘Scams and Incompetence’

Last Updated on July 15, 2021

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Wells Fargo has announced that it is no longer offering personal lines of credit, and that it will be shutting down its existing lines within weeks. 

In a six-page letter (which has not been posted to Wells Fargo’s press site)  the multi-national banking corporation based in San Francisco, Calif., abandoned a popular consumer lending program in which it has been letting users borrow up to $100,000, typically at lower rates than credit cards.

The personal lines of credit were marketed largely as a way of consolidating one’s credit card debt and of avoiding “insufficient funds” charges. 

What likely stings worse than the mere loss of the line, for the users, is that the letter warned them that their credit ratings could be hurt by this move. 

Credit reporting companies use a “credit-utilization ratio” as an important metric. This is the ratio of the overall amount of debt a consumer has incurred to the amount of credit he has available.  The cancellation of the personal lines of credit means that for those affected their overall credit available will be lessened, which means necessarily that the utilization ratio will be higher. As a rule of thumb, lenders prefer a ratio of 30% or less. 

Senator Warren Reacts  

Senator Elizabeth Warren (D – MA) reacted sharply to this news. 

The reference to “scams” is an allusion to a settlement announced in August 2020 in which Wells Fargo consented to findings that it had failed to supervise two of its registered representatives. These representatives had recommended that investors put a large proportion of their assets into dubious energy ventures. Wells Fargo also consented to a fine of $350,000 and restitution payments to the duped investors. 

With regard to the credit score consequences of the closing of the personal lines of credit, Warren’s tweet also said that Wells Fargo should “make this right” but she didn’t say what exactly Wells Fargo should do about it. Put in a good word for these customers with the credit reporting agencies? Offer cash compensation?

Senator Warren Warns Wells Fargo
Senator Warren tweeted that “not a single @WellsFargo customer should see their credit score suffer just because their bank is restructuring after years of scams and incompetence.” Photo credit: Shutterstock.com

What Warren thinks about these personal lines of credit matters. Though any U.S. Senator’s opinion matters, Warren’s likely matters a good deal more than most to the banking industry.  She chairs two important subcommittees of the Banking Committee, and is an important voice both on the Banking Committee as a whole, and within the Democratic Party’s hierarchy in the Senate. 

Warren also has a history of engagement with banking regulations. She was the driving force behind the creation of the Consumer Financial Protection Bureau during the Obama era. With her party in control of the Senate, her opinions may very much impact the way Wells Fargo and its peers do business. 

What You Can Do  

Regardless of what legislative or regulatory kickback Wells Fargo might get, the customers using these PLOC may be wondering what they should do to mitigate the consequences for themselves.

Ryan Wangman, writing for Insider, suggests that someone in this position should shop around for other lenders with PLOCs. After all, if Wells Fargo is your only PLOC, and it is closed, your utilization ratio could go to 100%. Another PLOC will get that ratio back down and, of course, will restore the convenience that led you to seek out a PLOC from Wells Fargo in the first place.

Some of the other financial institutions in this space are: PNC Bank, Pentagon Federal Credit Union, US Bank, and SunTrust. You should research which will give you the best rates and terms.