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Recent closure of Wells Fargo “POC”

By Terry Savage on July 26, 2021 | Wild Card

Dear Ms. Savage, I was fortunate to hear you on The Jim Bohannon radio show. I tried to get through to ask a question but to no avail. Ms. Savage my question is this: from the recent events taken by Wells Fargo in closing their Personal Lines of Credit offered to the public. Can you comment on what this action taken means concerning the Banking Industry as a whole, and could this be an isolated event, or do you see many more banks both here and abroad taken similar decisive measures to lower their own “risk portfolios” ?
Thank you in advance for your response. Have a “prosperous” day.

Terry Says

A personal “line of credit” is far different from a credit card (which remain in Wells Fargo’s portfolio). Both are unsecured, but you pay more in interest and fees for a credit card, and a card has additional ways for the lender to monitor risk.

Except for those who were “dropped” from this bank product, I think this move was a good one — and a sign that this bank is checking its risk vulnerability very carefully. Personal lines of credit are a “leftover” from an earlier era of banking, when banks knew their customers very well and were willing to lend unsecured credit.

Wells used that technique to increase its customer base in the past decade, adding risk to its portfolio in order to gain customer volume. They were known for that, and censured by regulators for some of their moves to add customers.
Now that a new and highly respected banker, Charles Scharpf, has taken over, they are de-risking their portfolio.

And that makes it a “safer” bank from the point of view of investors. (Remember all depositors are insured up to FDIC limits, so in that sense the bank is always safe.) Investors are the ones who bear the risk of potential loan losses. The financial world understands and applauds this move on the part of Wells.



a personal
finance question