WASHINGTON–The $100 million fine the Consumer Financial Protection Bureau imposed on Wells Fargo & Co. for alleged illegal practices involving account openings is the largest penalty in the agency’s history and one created to send a message to the broader financial industry to discourage similar activities.
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“We regret and take responsibility for any instances where customers may have received a product that they did not request”, Wells Fargo said in its statement.
According to the Protection Bureau, in an effort to help hit sales goals, Wells Fargo employees secretly opened millions of unauthorized deposit and credit card accounts.
Wells Fargo employees have sued the bank alleging they were forced to work unpaid overtime as they tried to meet goals, while bank customers have sued alleging that fake accounts were opened in their names. Consumers were sometimes hurt because the bank charged them for insufficient funds or overdraft fees since money wasn’t in their original, authorized accounts.And the bank found in its analysis that about 565,000 credit cards may not have been authorized by consumers, incurring annual fees and other charges.
The CFPB said “full restitution” would be paid by Wells Fargo to victims.
Analysts have marveled at the bank’s ability to cross-sell mortgages, credit cards, and auto loans to customers.
The misconduct at Wells Fargo was widespread nationwide across its network.
The practices uncovered at the South Dakota-based bank violated multiple provisions of the Dodd-Frank Wall Street Reform Act of 2010, regulators said.
The employees also applied for credit cards on behalf of more than a half-million existing customers without their knowledge or consent, the CFPB said, enrolled them in banking services they did not ask for, and activated debit cards – in some cases “going so far as to create [new] PINs without telling consumers”. “Employees then transferred funds from consumers’ authorized accounts to temporarily fund the new, unauthorized accounts”, wrote the CFPB. This may have been part of the reason why the company chose to hire an independent consultant to look into the situation.
Wells Fargo spokeswoman Mary Eshet said the bank fired 5,300 employees over “inappropriate sales conduct”. “Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed”. “It sounds good, but in reality it doesn’t benefit most customers”.
The CFPB declined to explain how it came up with the $100 million penalty figure.
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“If we learn of any additional customers who require refunds, we will make those refunds promptly”, the company said in an email to employees Thursday. “We don’t comment on how we uncover these matters”, a spokesman said. “They should never be taken advantage of”, said Mike Feuer, the Los Angeles City Attorney who joined the settlement. After filing the suit, his office received more than 1,000 calls and emails from customers as well as current and former Wells Fargo employees about the allegations.
