Back in 2008, the banks launched their bid to change Javier Sarmiento’s spending habits. A resident of Southern California’s San Fernando Valley, Sarmiento went out one day to collect his mail and found wedged among the letters an unmarked envelope. It contained two things: a shiny new credit card and a lengthy pamphlet from Wells Fargo urging him to use it.
Sarmiento says he had no need for the card and promptly asked Wells Fargo to stop sending him what he now refers to as “propaganda.” But the envelopes kept coming. Every few months, Wells Fargo or Bank of America or another enormous corporation would send a bulky letter begging him to get a credit card and open an account. But Sarmiento refused to comply. He didn’t want to get into the habit of spending money he didn’t have.
Then, in 2010, as the Great Recession continued its grip on the American economy, Sarmiento lost his job as a security-camera installation specialist, a job he’d had for 15 years. The money in his bank account dwindled. Reluctantly, he opened one of those envelopes and activated a Wells Fargo credit card. “Money was tight,” he says. “I used the card to get by.”
At first, things were fine: He still had enough cash on hand to make his payments, and the interest rate on the card started at 3 percent. Then he missed a payment. He says he was hit with a $35 late fee and saw his interest rate soar by five percentage points.
From there, Sarmiento says, he was sucked into whirlpool of debt, trying to make up for late payments while his interest rate climbed ever higher, eventually reaching 21 percent. When he talked to Wells Fargo representatives about his troubles, they’d try to convince him to open new accounts. “They just want to squeeze whatever they can out of you,” he says. “It was unbelievable.”
Sarmiento’s story is one vantage point from which to view the predatory-banking crisis that has trapped an untold number of Americans in recent years. It illuminates the hard-edge tactics—purveying unwanted credit cards, pressuring customers to open new accounts, punitive interest-rate policies—that big banks deploy to rake in profits. Such tactics have now come under scrutiny nationwide. Last fall, controversy engulfed Wells Fargo as the public learned about the company’s practice of opening fraudulent accounts without customer consent. The bank’s imposition of stringent sales goals on its employees, whom managers often pressured to sell 15 or more new products a day, led to the creation of as many as 2 million phony bank and credit-card accounts between 2005 and 2016.
In September, Wells Fargo agreed to pay a $100 million fine to the Consumer Financial Protection Bureau, whose enforcement action against the bank was the largest in the CFPB’s history. Congress, meanwhile, held heated hearings on Wells Fargo’s duplicitous behavior. In one now-viral moment, Senator Elizabeth Warren interrogated the bank’s then-CEO, John Stumpf, and told him bluntly that he should face investigation. “You should resign,” Warren said. “You should give back the money that you took while this scam was going on. And you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission.”