Trust Me? Why Should I?

“The leaders who work most effectively, it seems to me, never say 'I.' And that's not because they have trained themselves not to say 'I.' They don't think 'I.' They think 'we'; they think 'team.' .... This is what creates trust, what enables you to get the task done.” - Peter Drucker, the iconic management consultant.

I recently authored an article that referenced recent Pew Research Center polling data on how Americans they surveyed felt about different groups of business segments, industries and organizations in the United States. The infographic below summarizes the finding of their research and as you can see, banks and other financial institutions have the second highest negative perception and the eight lowest positive perception as of last fall (out of nine groups) in the minds of the American public. The only lower ranked group were “large corporations”, and the highest rated groups (in terms of positive perception) were small businesses and the military.

And all of this research published last fall was well before the current SVB and Signature Bank debacle currently unfolding in front of us right now that has had to deflate the perception of consumers and the American public confidence unfortunately further in our banking system and the high-tech industry in the United States. ?

Source: Pew Research Center, November 17, 2022.

Then as I was reading early this morning, I saw the following news article that adds high octane fuel to the fire of a further erosion in any positive karma the American public have in the integrity of our banking and financial institutions. Let me be clear at the outset that while this might be an isolated and unique situation, the frank reality is that we are only a strong as our “weakest link” and events like this taint the 99.99% of us in the financial services industry that have always strived to ?manage, run, and operate our firms with the highest positive levels of trust, honesty, transparency and integrity.

The text below is reproduced from the New York Times online March 16, 2023, edition.

“A former top Wells Fargo executive is likely headed to prison for her role in the sham accounts scandal that engulfed the bank six years ago. Carrie L. Tolstedt, Wells Fargo’s former head of retail banking, agreed to plead guilty to a criminal charge of obstructing a bank examination, the Justice Department said on Wednesday. The crime carries a maximum sentence of five years in prison. Ms. Tolstedt’s plea agreement calls for a sentence of up to 16 months, the agency said.

She is the first high-ranking Wells Fargo executive to be criminally charged for the bank’s actions.

Ms. Tolstedt ran Wells Fargo’s banking branches during the years that the bank opened what may have been millions of sham bank accounts, a scandal that?burst into public view in 2016 and toppled two successive chief executives. Ms. Tolstedt, 63, had consistently denied any wrongdoing. She retired from the bank shortly before its misdeeds became public and was later retroactively fired for cause.

Ms. Tolstedt knowingly turned a blind eye to signs that bank employees were using illegal tactics?to meet the bank’s aggressive sales targets, according to prosecutors. In 2015, as the Office of the Comptroller of the Currency scrutinized the bank’s sales tactics, Ms. Tolstedt helped prepare a memo in which she concealed details about the scope and scale of the internal problems, they said.

“Obstructing an investigation compromises the mission of those seeking the truth, and we will hold accountable any individual who attempts to conceal wrongdoing,” said Joseph T. McNally, the acting U.S. attorney for the central district of California.”

As you may recall, in December 2022, the Consumer Financial Protection Bureau “CFPB” ordered Wells Fargo to pay $3.7 Billion for Widespread Mismanagement of Auto Loans, Mortgages, and Deposit Accounts. If you are not familiar with the CFPB, it notes on their website www.consumerfinance.gov “is a U.S. government agency dedicated to making sure you are treated fairly by banks, lenders and other financial institutions.” Their website states that they have received 3.3 million consumer complaints, produced $16 billion in financial relief as a result of CFPB actions and helped 192 million people become eligible for financial relief. According to Wikipedia, the Bureau was formed on July 21, 2011, and their funding was recently ruled unconstitutional in the 5th Judicial Circuit Court on October 19, 2022. It is headquartered in Washington, D.C., has 1,591 employees, an annual budget for FY 2021 of $596 million and the parent agency of the CFPB is the Federal Reserve Bank.

The CFPB’s jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations,?foreclosure relief services, debt collectors and other financial companies with operations in the United States.

When I researched Wells Fargo, I thought it was important to provide the facts accurately and objectively about their fine by the CFPB, in light of the sentencing referred to by the New York Times. I was aghast when I read the entire press release about this on the CFPB website, and I have reproduced it below verbatim. The Press Release was dated December 20, 2022.

“CFPB Orders Wells Fargo to Pay $3.7 Billion for Widespread Mismanagement of Auto Loans, Mortgages, and Deposit Accounts

?Company repeatedly misapplied loan payments, wrongfully foreclosed on homes and illegally repossessed vehicles, incorrectly assessed fees and interest, charged surprise overdraft fees, along with other illegal activity affecting over sixteen million consumer accounts

WASHINGTON, D.C.?– The Consumer Financial Protection Bureau (CFPB) is ordering Wells Fargo Bank to pay more than $2 billion in redress to consumers and a $1.7 billion civil penalty for legal violations across several of its largest product lines. The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes. Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank. Wells Fargo also charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts. Under the terms of the order, Wells Fargo will pay redress to the over sixteen million affected consumer accounts, and pay a $1.7 billion fine, which will go to the CFPB's Civil Penalty Fund, where it will be used to provide relief to victims of consumer financial law violations.

“Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families,” said CFPB Director Rohit Chopra. “The CFPB is ordering Wells Fargo to refund billions of dollars to consumers across the country. This is an important initial step for accountability and long-term reform of this repeat offender.”

Wells Fargo (NYSE: WFC) is one of the nation's largest banks serving households across the country. It offers a variety of consumer financial services, including mortgages, auto loans, savings and checking accounts, and online banking services.

According to today’s enforcement action, Wells Fargo harmed millions of consumers over a period of several years, with violations across many of the bank’s largest product lines. The CFPB’s specific findings include that Wells Fargo:

Unlawfully repossessed vehicles and bungled borrower accounts:?Wells Fargo had systematic failures in its servicing of automobile loans that resulted in $1.3 billion in harm across more than eleven million accounts. The bank incorrectly applied borrowers’ payments improperly charged fees and interest, and wrongfully repossessed borrowers’ vehicles. In addition, the bank failed to ensure that borrowers received a refund for certain fees on add-on products when a loan ended early.

Improperly denied mortgage modifications:?During at least a seven-year period, the bank improperly denied thousands of mortgage loan modifications, which in some cases led to Wells Fargo customers losing their homes to wrongful foreclosures. The bank was aware of the problem for years before it addressed the issue.

Illegally charged surprise overdraft fees:?For years, Wells Fargo unfairly charged surprise overdraft fees - fees charged even though consumers had enough money in their account to cover the transaction at the time the bank authorized it - on debit card transactions and ATM withdrawals. As early as 2015, the CFPB, as well as other federal regulators, including the Federal Reserve, began cautioning financial institutions against this practice, known as authorized positive fees.

Unlawfully froze consumer accounts and mispresented fee waivers:?The bank froze more than one million consumer accounts based on a faulty automated filter’s determination that there may have been a fraudulent deposit, even when it could have taken other actions that would have not harmed customers. Customers affected by these account freezes were unable to access any of their money in accounts at the bank for an average of at least two weeks. The bank also made deceptive claims as to the availability of waivers for a monthly service fee.

Wells Fargo is a repeat offender that has been the subject of multiple enforcement actions by the CFPB and other regulators for violations across its lines of business, including?faulty student loans servicing, mortgage kickbacks, fake accounts and harmful auto loan practices.

Enforcement action

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating federal consumer financial laws, including by engaging in unfair, deceptive, or abusive acts or practices. The CFPB’s investigation found that Wells Fargo violated the Act’s prohibition on unfair and deceptive acts and practices.

The CFPB order requires Wells Fargo to:

Provide more than $2 billion in redress to consumers:?Wells Fargo will be required to pay redress totaling more than $2 billion to harmed customers. These payments represent refunds of wrongful fees and other charges and compensation for a variety of harms such as frozen bank accounts, illegally repossessed vehicles, and wrongfully foreclosed homes. Specifically, Wells Fargo will have to pay:

More than $1.3 billion in consumer redress for affected auto lending accounts.

More than $500 million in consumer redress for affected deposit accounts, including $205 million for illegal surprise overdraft fees.

Nearly $200 million in consumer redress for affected mortgage servicing accounts.

Stop charging surprise overdraft fees:?Wells Fargo may not charge overdraft fees for deposit accounts when the consumer had available funds at the time of a purchase or other debit transaction, but then subsequently had a negative balance once the transaction settled. Surprise overdraft fees have been a recurring issue for consumers who can neither reasonably anticipate nor take steps to avoid them.

Ensure auto loan borrowers receive refunds for certain add-on fees:?Wells Fargo must ensure that the unused portion of GAP contracts, a type of debt cancellation contract that covers the remaining amount of the borrower’s auto loan in the case of a major accident or theft, is refunded to the borrower when a loan is paid off or otherwise terminates early.

Pay $1.7 billion in penalties:?Wells Fargo will pay a $1.7 billion penalty to the CFPB, which will be deposited into the CFPB’s relief fund.”

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Which in a very long-winded way brings me back full circle to the point of the article as noted in its’ title “Trust Me? Why?”

Now more than ever, it is imperative that we work to rebuild trust in the American banking and financial services industry on a collective and individual basis. For me, trust is everything and we cannot succeed unless our clients, employees, partners and other stakeholders trust us, can we?

The Merriam-Webster dictionary defines trust as “an assured reliance on the character, ability, strength or truth of someone or something.” It also defines truth as “one in which confidence is placed” and “a charge or duty imposed in faith or confidence or as a condition of some relationship.”

These characteristics must be the “North Star” that guide and drive every single act or step we take on a daily, never-ending basis in our global factoring firms (on a micro-basis) and our industry on a macro-basis. Nothing less should be acceptable or tolerated.

It has often been said that trust is the glue that holds every single relationship together, including all business and personal ones. Trust is built incrementally when we are consistently consistent, honest and transparent in everything we do. Trust is never just “given away” but has to be earned over and over.

Unfortunately, the trust that we have built over years or decades in our relationships can be destroyed or damaged in the blink of an eye. Like a cracked mirror, we can attempt to replace all of the pieces of glass when our trust is broken but the mirror will never be the same as it was before.

But just talking about trust or being trusted is not enough; we need to have it serve as the cornerstone of the way we serve our SME clients and each other. I have written on and spoken a great deal about trust over the past 25+ years and am always looking for resources to share about how we can do a better job of weaving trust into all that we do in our factoring firms. I recently read an interesting online work at https://positivepsychology.com entitled “10 Ways To Build Trust in a Relationship”. It was written by Heather Craig and scientifically reviewed by Christina R. Wilson and published online March 4, 2019.

It provides a litany of practical ideas about how to embed trust into our factoring firms and to reinforce the pillars of trust that include reliability, capability, transparency and humanity. While more geared to how to build trust on a personal basis, I have adapted her key concepts for use in a business or organizational setting for this article.

The key point she makes at the outset is an especially important one and that is you cannot have a healthy relationship without trust. So, then these are just a couple of excellent questions for us to consider and think about; how do we develop trust in the first place? Can trust that has been broken be rebuilt?

She also notes that “that the scientific literature on building trust is limited. Plenty of research exists examining the importance of trust and what it is, but that research does not tend to lay out practical steps for building trust. Therefore, much of the research supporting the following article is from web sources, not journal articles.”

Her work covers a lot of ground, and I am only going to use one section of the twelve topics she addressed. These included:

1.??????How to Build Trust: 12 General Tips

2.?????How to Build Trust with Your Partner in a Marriage or Relationship

3.????Rebuilding Trust After Cheating, Affairs, and Infidelity

4.????How to Develop Self-Trust

5.????Trust-Building Games and Exercises for Group Therapy

6.????Building Trust and Credibility in Business as a Leader

7.?????10 Trust-Building Activities for Teams and Employees in the Workplace

8.????How to Build Trust with Customers, Patients, and Clients

9.????The 5 Best Books on Building Trust

10.?12 Quotes on Building Trust

11.??A Take-Home Message

12.?References

The suggestions she discusses in her article were originally provided by Carthage Buckley, a stress and performance coach. They made a great deal of sense to me, and I have selected the ones I felt most appropriate for us in an organizational or business environment below.

1. Be true to your word and follow through with your actions. The point of building trust is for others to believe what you say. Keep in mind, however, that building trust requires not only keeping the promises you make but also not making promises you are unable to keep. This is so important as an organization to follow without exception or to make excuses why we did not do as we had promised.

This is also particularly important as when we keep our word, it shows that we are serious and that we are more likely to get treated with respect in return, building trust incrementally.

2. Learn how to communicate effectively with others.

Why do relationships often fall apart? Because as the famous movie line goes “what we have here is a failure to communicate.” We need as factoring firms to make sure that our clients, partners, employees and other stakeholders have a clear understanding of what we are able to do to serve them and what has been agreed upon as part of our business relationship with them at all times.

3. Remind yourself that it takes time to build and earn trust.

This is the least understood and one of the most important observations she makes. The world is increasingly less and less patient and there are days when everyone wants something yesterday or right now. Trust is not built or granted in a split second, but it has to be earned incrementally.

Think about trust like planting a seed of corn in the field; you have to nurture it, feed it and watch it grow over a period of time. When it does, we reap the harvest of long-term relationships that add enormous value to the quality of our factoring firms.

4. Take time to make decisions and think before acting too quickly.

What seems like an amazingly simple statement I believe is often much more difficult to do on a “real life, daily basis.” We need to make sure that as professional service firms, we only make commitments and promises that we have the talents, tools, capital and ability to do. The other side of this coin is that this also means we must learn to say “no” if and when we cannot. If we do not, we do a disservice to ourselves and the other party who we will eventually let down, don’t we? Better to pass and move on to the next opportunity than to embarrass ourselves and be worse off due to our own inability to say no.

5. Value the relationships that you have—and do not take them for granted.

Another brilliant observation and one that merits constant thinking about and action. Trust comes from being consistent and serving our clients well, through thick and thin. We need to make sure that our SME clients know that we genuinely appreciate the opportunity to serve them and periodically tell them so. Do we or do we just take them for granted? I have often said that careful client selection drives retention and retention drives everything in our firm. We retain long term clients only when we never take them for granted.

6. Always be honest.

Honestly is not only the best policy, but it should also be the only policy. When we make a mistake or shoot ourselves in the foot, we need to tell the truth, immediately acknowledge our error and apologize. When we make up half truths or lie about something, we have broken the bond of trust with our client, colleague, partner or referral source and we erode the years of hard work we have built in a split second.

7. Do not always self-promote or do it only very carefully and on a low-key basis.

All successful organizations work together as a cohesive team to accomplish a set goal. Tone down your innate desire to self-promote and always make sure to acknowledge others who have been a part of the effort. When we show appreciation for others, we build trust and also show our leadership talent to others. These are very important ways to build long term trust and loyalty in our factoring firms and helps reduce selfish behavior internally. I believe that selfishness can destroy trust and if not addressed quickly can spread its’s destructive power quickly. This is why expressing gratitude is so important to the long-term viability and success of any organization or business.

8. And finally, always do what you believe to be right.

Truer words have never been spoken or written. When we take actions or steps to be accepted or just “go along with the crowd”, we sacrifice our own beliefs and values. This destroys trust in ourselves, what we believe in and what we value. When we do what we believe is right, we honor our values and beliefs and strengthen them. These builds trust even when others are in total disagreement with the decisions we have made. Always do what is right.

In summary and conclusion, we need to rebuild trust in the financial services industry quickly and decisively if we are to succeed long term as individuals and organizations. When we do, we will achieve what Blaine Lee Pardoe noted below: “when people honor each other, there is a trust established that leads to synergy, interdependence, and deep respect. Both parties make decisions and choices based on what is right, what is best, what is valued most highly.”