Wells Fargo Ending Personal Lines of Credit
Earlier this month, Wells Fargo announced the discontinuation of its personal lines of credit product offerings. The revolving credit lines allowed customers to borrow anywhere from $3,000 to $100,000, and were typically used to consolidate higher-interest credit card debt, pay for home renovations, and avoid overdraft fees.
The bank “reviewed its product offerings and decided to discontinue offering new Personal and Portfolio line of credit accounts and close all existing accounts,” according to customer letters reviewed by CNBC. Wells Fargo revealed that it now plans to focus on credit cards and personal loans.
In the “Frequently Asked Questions” section of the letter, Wells Fargo warned customers that the account closures could “have an impact on your credit score.” The lender also noted that account closures would not be reviewed or reversed, but that the closures were final.
The credit lines had variable interest rates from 9.5 percent to 21 percent when offered. Now that customers have been given a 60-day notice of the account closures, any remaining balances will require regular minimum payments at a fixed rate. Though Wells Fargo has not disclosed how many credit lines will be closed, it had $24.9 billion loans in its “other consumer” category in March.
Analysts noted the strangeness of the bank’s decision with the industry’s present need to increase loan growth. In 2020, large banks experienced the first aggregate drop in loans in over a decade; of the four biggest U.S. banks, Wells Fargo saw the worst decline, according to Barclays bank analyst Jason Goldberg.
The COVID-19 pandemic drew Wells Fargo to offload deposits and assets, and halted other products because of limits from the Federal Reserve. In 2018, the Fed prohibited the bank from growing its balance sheet until it fixed compliance issues revealed by their fake accounts scandal. Because of the asset cap, the bank halted all new home equity lines of credit in 2020, and withdrew from a segment in the auto lending business later that year.