For everyday borrowers, it can feel like one opinion won't make a difference. However, Wells Fargo is changing course after receiving customer feedback about the bank's decision to cancel all existing personal lines of credit—even at risk of harming credit scores. Now, Wells Fargo is abandoning those plans altogether.
What does the bank's reversal of a previous decision mean for customers who hold personal lines of credit? What's next for the Wells Fargo personal lending leg?
Wells Fargo announces its decision to keep personal credit lines open.
In a press release, Wells Fargo announced that there won't be more cancellation of personal lines of credit that borrowers already have open with the bank. At the time of the announcement, the bank had already blocked new customers from applying for home equity lines of credit, and it sent out a letter to all existing customers that any current lines of credit would be closed.
This caused a fuss with the community because canceling a line of credit suddenly before it's paid off and closed can ding a borrower's credit score. For a bank that's still dealing with ramifications following the account fraud scandal that came to light in 2016, the decision to sacrifice customers' financial wellbeing for the bottom line stung.
Why Wells Fargo reversed its decision
Wells Fargo first announced its decision to cancel personal lines of credit in early July. Less than six weeks later, it reversed the move. What caused the bank to make such a bold decision in the first place, and why are things changing?
According to John Rasmussen, the executive vice president of Wells Fargo's personal lending business, the decision is "based on feedback from our customers." Rasmussen thanked those who left feedback about the decision. Clearly, the bank took customers' input to heart.
That feedback has to do with two things. First, there's the inconvenience of losing a loan you thought you had access to. Then, there's the issue of a credit line closure impacting credit scores.
What this means for Wells Fargo personal line of credit holders
If you're already borrowing through a personal line of credit with Wells Fargo, Rasmussen ensures, "The terms of your account are not changing."
Whereas a cancellation would have impacted your credit score, your financial vehicle is staying put, which means your credit score is too.
If you have already sought new lenders, you can either decide to pursue a new relationship or hold on to your line of credit until you are able to pay it off.
The bank still isn't offering credit lines for new customers who don't already have an account. This pathway will help them phase out of the personal lending business more gracefully.
Customers, stay tuned for correspondence from the bank
You might have already received communication from the bank informing you that your personal credit line will stay open. Wells Fargo recently started sending correspondence to people informing them that their account will remain open. If you haven't yet received a letter or email, stay tuned.
Even if you haven't used your account since October 2020, you can keep it open if you want. Alternatively, you can close your account and, if necessary, look elsewhere for a loan.