Wells Fargo says it's shutting down all personal lines of credit

Banking giant Wells Fargo wrote to customers on Thursday that it was shuttering all personal lines of credit in the coming weeks, and will no longer offer the product.

The news sparked mixed feelings among the bank’s customers as the lending product was quite popular among some of its customers. The credit line which allowed customers to borrow up to $3,000 to $100,000 was introduced to consolidate higher-interest credit card debt, avoid overdraft fees on linked accounts, or pay for home renovations.

“In an effort to simplify our product offerings, we’ve made the decision to no longer offer personal lines of credit as we feel we can better meet the borrowing needs of our customers through credit card and personal loan products,” the bank said in a letter.

In a letter to customers, Wells Fargo said it “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 stated that it would rather focus on credit cards and personal loans.

Since the Wells Fargo fake accounts scandal in 2018, the bank’s CEO Charles Scharf has been under pressure to make difficult decisions which may cause a lot of inconveniences but ultimately benefit the bank. During the coronavirus pandemic, the bank was forced to offload assets and deposits, as well as cancel some products. Wells Fargo’s customers were also affected last year when the bank announced that it was pausing all new home equity lines of credit.

“We realize change can be inconvenient, especially when customer credit may be impacted,” the bank said. It added that it was “committed to helping each customer find a credit solution that fits their needs.”

The bank has issued customers a 60-day notice that their accounts will be shut down. The statement added that all remaining balances will require regular minimum payments at a fixed rate.

According to analysts’ review of Wells Fargo’s balance sheet in comparison to the growth of rivals – Bank of America and JPMorgan Chase – the asset cap has cost the bank billions of dollars. 

The bank has informed customers that the closure of personal lines of credit accounts “may have an impact on your credit score,” the letter stated under the FAQ segment. It also stated that account closures wouldn’t be reviewed or reversed as the bank apologized for any “inconvenience this Line of Credit closure will cause.” The bank said the account closure is permanent.

In 2018, the Federal Reserve barred Wells Fargo from growing its balance sheet until all issues related to its fake account scandal had been fixed. The bank has declined to respond to questions of whether or not the latest move had anything to do with the Fed asset cap.