Written By ESR News Blog Editor Thomas Ahearn
The Consumer Financial Protection Bureau (CFPB) has fined Wells Fargo Bank, N.A. $100 million – the largest penalty the CFPB ever imposed – as part of a total fine of $185 million “for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts,” according to a CFPB press release.
Under the CFPB’s Consent Order, Wells Fargo will pay full restitution to all victims and a $100 million fine to the CFPB’s Civil Penalty Fund. Wells Fargo will also pay a $35 million penalty to the Office of the Comptroller of the Currency and $50 million to the City and County of Los Angeles.
“Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,” CFPB Director Richard Cordray stated in the press release. “Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed.”
Wells Fargo issued a statement on the agreements related to sales practices that indicated the amount of the settlements regarding allegations that some of its retail customers received products and services they did not request totaled $185 million, plus $5 million in customer remediation.
The statement from Wells Fargo also indicated “$2.6 million has been refunded to customers for any fees associated with products customers received that they may not have requested. Accounts refunded represented a fraction of one percent of the accounts reviewed, and refunds averaged $25.”
Analysis by Wells Fargo – one of the biggest banks in the United States – found that bank employees had opened more than two million deposit and credit card accounts that may not have been authorized by consumers. CNN reported that 5,300 Wells Fargo employees were fired over these phony accounts.
According to the CFPB, thousands of Wells Fargo employees – spurred on targets and incentives – boosted sales figures by opening unauthorized accounts and funding them by transferring funds from authorized accounts of consumers without their knowledge or consent. Violations by Wells Fargo include:
- Opening deposit accounts and transferring funds without authorization: According to analysis by Wells Fargo, employees opened roughly 1.5 million deposit accounts that may not have been authorized by consumers.
- Applying for credit card accounts without authorization: According to the bank’s own analysis, Wells Fargo employees applied for roughly 565,000 credit card accounts that may not have been authorized by consumers.
- Issuing and activating debit cards without authorization: Wells Fargo employees requested and issued debit cards without consumers’ knowledge or consent, going so far as to create PINs without telling consumers.
- Creating phony email addresses to enroll consumers in online-banking services: Wells Fargo employees created phony email addresses not belonging to consumers to enroll them in online-banking services without their knowledge or consent.
The Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits unfair, deceptive, and abusive acts and practices. Under this Act, the CFPB has the authority to take action against institutions violating consumer financial laws. The CFPB requires Wells Fargo to:
- Pay full refunds to consumers: Wells Fargo must refund all affected consumers the sum of all monthly maintenance fees, nonsufficient fund fees, overdraft charges, and other fees they paid because of the creation of the unauthorized accounts. These refunds are expected to total at least $2.5 million.
- Ensure proper sales practices: Wells Fargo must hire an independent consultant to conduct a thorough review of its procedures. Recommendations may include requiring employees to undergo ethical-sales training and reviewing the bank’s performance measurements and sales goals to make sure they are consistent with preventing improper sales practices.
- Pay a $100 million fine: Wells Fargo will pay a $100 million penalty to the CFPB’s Civil Penalty Fund. The penalty is the largest the CFPB has imposed to date.
“Wells Fargo is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request.” Wells Fargo said in the statement on the agreements with the CFPB.
In addition, an email message to all Wells Fargo employees stated: “Our entire culture is centered on doing what is right for our customers. However, at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action.” Wells Fargo customers may view their accounts at wellsfargo.com/commitment.
Founded in 1852, Wells Fargo serves one in three households in the United States by providing banking, insurance, investments, mortgage, and finance services. The Wells Fargo statement is available at www.wellsfargo.com/about/press/2016/sales-practices-agreements_0908.content.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work. To learn more, visit www.consumerfinance.gov. The CFPB’s Consent Order can be found at http://files.consumerfinance.gov/f/documents/092016_cfpb_WFBconsentorder.pdf.
The complete CFPB press release about the Wells Fargo Bank fine is available at www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-fines-wells-fargo-100-million-widespread-illegal-practice-secretly-opening-unauthorized-accounts/.
Background Checks Can Help with Insider Threats Like Wells Fargo Case
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