Wells Fargo is closing down personal credit lines as the bank moves to drop the banking product, CNBC reported on Thursday (July 8), citing letters the news outlet reviewed that were sent to customers.
Revolving credit lines extended loans of between $3,000 and $100,000 and were advertised as a way for people to consolidate debt with high interest rates, pay for renovations and sidestep checking account fees associated with overdrafts. The bank told customers that its move to drop the service could negatively affect their credit scores, Wells Fargo indicated in the letter, per CNBC.
“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 bank said in the six-page letter, according to CNBC.
The move is intended to enable Wells Fargo to shift its focus to credit cards and personal loans, the letter indicated, per CNBC.
The COVID-19 pandemic brought about changes that forced Wells Fargo CEO Charles Scharf to implement tough decisions that included selling off assets and deposits, CNBC reported. Further, the bank also had to step away from some products due to changes mandated by the Federal Reserve.
Three years ago the Federal Reserve prevented Wells Fargo from increasing its balance sheet before it took the time to remedy compliance flaws relating to the bank’s fake accounts scandal.
The asset cap resulted in Wells Fargo losing billions in earnings when compared to the balance sheets of competitors JPMorgan Chase and Bank of America, analysts said, per CNBC.
Wells Fargo decided in February that it was planning to unload its $603 billion asset management business for $2.1 billion. The division was sold to private equity firms GTCR LLC and Reverence Capital Partners.
The bank in April said it had seen a 20 percent growth in debit card spending as the world started reopening post-pandemic. There was concurrently a 6 percent increase in credit card spending.
Home equity lines of credit saw a 19 percent decline across the country as of June, with big bank brands — including Wells Fargo and J.P. Morgan — upping the requirements for offering new credit lines.