Wells Fargo Collateral Protection Insurance Scandal Essay

Wells Fargo Scandal

The Wells Fargo Collateral Protection Insurance (CPI) Scandal occurred as a result of the banking firm placing CPI on accounts even though the account holders did not ask for it or want it. It resulted in customers paying unnecessary and higher fees over a period of time. Wells Fargo was sued and agreed to settle the case out of court for approximately $400 million without admitting fault (Top Class Actions, 2019). The scandal, however, caused Wells Fargo to lose a great deal of reputation: customers began leaving the bank in droves and the firm suddenly found itself wondering how it had fallen and what it could do to shore up trust among customers once more. For years, the bank seemed happy to dupe customers with excessive fees, believing no customer would be sophisticated enough to realize just how he was being overcharged—but customers did catch on and the scandal revealed a major weakness in the firm’s ethical framework. Instead of asking what the firm could do, it needed to be asking what the right thing to do was, as Horowitz (2011) notes in his TEDx Talk. This paper will discuss the Wells Fargo scandal from three ethical perspectives and show.

>By attempting to cheat its customers for a short-term gain, Wells Fargo was essentially acting from an Ethical Egoist perspective: promoting its own self-interests based upon an ends-justify-the-means approach. The problem with this was that Wells Fargo did not take a proper long-term view of the risk of this approach. Sooner or later, the firm would be called out for its shoddy dealings with customers and that would negatively impact its reputation. With a negatively impacted reputation, Wells Fargo could lose billions in service fees due to declining clientele. Thus, though the firm was acting from the standpoint of ethical egoism, it certainly did not benefit from this ethical framework in the long run and in the short run only benefitted slightly, until it was required to make amends to clients.

From another perspective, it could be argued that Wells Fargo was engaging in a utilitarian approach to banking. The utilitarian ethical perspective was developed by J.S. Mill and the basic moral concept underlying this perspective is that the most moral course of action is that which delivers the greatest common good (Goodpaster, 1983). However, as critics point out, the “utility” of the ethical philosophy is difficult to pinpoint because it does not explicitly define the “good” that is expected to be so common and it also can lead to a moral sense and a practical sense of action pointing in two different…

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…or unsuspecting clients. To rebuild its reputations, Wells Fargo has to get back to basics, and the deontology of Kant is as basic as it gets in terms of moral philosophy. The ethical framework is one that has stood the test of time, and though it has its critics, it nonetheless satisfies quite well for a firm like Wells Fargo. Ethical Egoism and Utilitarianism are less helpful because they do not focus on a clear definition of the “the good” in an objective or universal sense. That is not a problem with Kantian Ethics. The good is clearly defined as the moral imperative that arises out of an awareness of one’s duty. With a written code of ethics that defines the bank’s duty to its clients, the moral awareness would be clear to all.

In conclusion, a Kantian Ethical framework would benefit Wells Fargo at this point and assist the firm in seeing its clients as the end in themselves rather than as a means to an end for the firm. The firm must realize that it exists to serve the client, and in return it should expect a fair recompense. When the firm tries to take advantage of its clients’ lack of knowledge about legal jargon, it is failing to do its duty to the client—and that is what…