Wells Fargo Bank reached agreements with the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the Office of the Los Angeles City Attorney, regarding allegations some of its retail customers received products and services they did not request. Wells agreed to pay a huge fine and terminated 5,300 employees.
The amount of the settlements, which Wells Fargo had fully accrued for at June 30, 2016, totaled $185 million, plus $5 million in customer remediation.
Wells Fargo issued the following statement related to today’s news:
Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us. 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.
Our commitment to addressing the concerns covered by these agreements has included:
• An extensive review by a third party consulting firm going back into 2011, which we completed prior to these settlements. The review included consumer and small business retail banking deposit accounts and unsecured credit cards opened during the period reviewed.
• As a result of this review, $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.
• Disciplinary actions, including terminations of managers and team members who acted counter to our values.
• Investments in enhanced team-member training and monitoring and controls.
• Strengthened performance measures that are tied to customer satisfaction, loyalty and ethics.
• Sending customers a confirming email within one hour of opening any deposit account, and sending an application acknowledgement and decision status letter after submitting an application for a credit card.
The Consumer Financial Protection Bureau (CFPB) says it fined Wells Fargo Bank $100 million for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts. Spurred by sales targets and compensation incentives, employees boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges. According to the bank’s own analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers. Wells Fargo will pay full restitution to all victims and a $100 million fine to the CFPB’s Civil Penalty Fund. The bank will also pay an additional $35 million penalty to the Office of the Comptroller of the Currency, and another $50 million to the City and County of Los Angeles.
According to today’s enforcement action, thousands of Wells Fargo employees illegally enrolled consumers in these products and services without their knowledge or consent in order to obtain financial compensation for meeting sales targets. The Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits unfair, deceptive, and abusive acts and practices. Wells Fargo’s violations include:
▪ Opening deposit accounts and transferring funds without authorization: According to the bank’s own analysis, employees opened roughly 1.5 million deposit accounts that may not have been authorized by consumers. Employees then transferred funds from consumers’ authorized accounts to temporarily fund the new, unauthorized accounts. This widespread practice gave the employees credit for opening the new accounts, allowing them to earn additional compensation and to meet the bank’s sales goals. Consumers, in turn, were sometimes harmed because the bank charged them for insufficient funds or overdraft fees because the money was not in their original accounts.
▪ 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. On those unauthorized credit cards, many consumers incurred annual fees, as well as associated finance or interest charges and other fees.
▪ 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.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices. Today’s order goes back to Jan. 1, 2011. Among the things the CFPB’s order requires of Wells Fargo:
▪ 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. Consumers are not required to take any action to get refunds to which they are entitled.
▪ 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. Today’s penalty is the largest the CFPB has imposed to date.
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