“Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed”.
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Even though the Wells Fargo scandal took place nationally, the settlement with L.A. requires the bank to alert all its California customers to review their accounts and shut down ones they don’t recognize or want.
Like other banks, Wells Fargo has pushed cross-selling of multiple products to its customers to bolster sales and profitability at a time when both have been under pressure from a sluggish economy and superlow interest rates.
In a prepared statement delivered to the media on Thursday, Richard Cordray, Director of the Consumer Financial Protection Bureau, said the enforcement action was levied after an agency investigation found Wells Fargo employees across the United States had created fraudulent deposit and credit card accounts in order to generate sales bonuses for themselves. The Consumer Financial Protection Bureau also fined the company 5 million ($100 million to the CFPB, $35 million to the Office of the Comptroller of the Currency and another $50 million to Los Angeles).
The New York Times adds that the $185 million fine isn’t the only blow to the company.
Wells Fargo officials fired approximately 5,300 employees associated with the scheme, according to published reports. The bank has also been ordered to make full restitution to customers, which is expected to be at least $2.5m (£1.9m).
“Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us”, the bank said in a statement.
In many cases, customers took notice only when they received a letter in the mail congratulating them on opening a new account.
“It is outrageous for a bank to use a customer’s private information without permission to open an unwanted account”, L.A. City Attorney Michael Feuer said.
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.
“It is way out of character for one of the cleanest banks around”, CLSA analyst Mike Mayo, tells him. “Every Wells Fargo team member is expected to adhere to the highest possible standards of ethics and business conduct”. About 100,000 customers have received refunds. The bank then sometimes charged consumers for insufficient funds or overdraft fees when the money was not in their original accounts. Piper Jaffray analyst Kevin Barker said he does not think the crackdown on Wells Fargo will have much of an impact on others in the industry.
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Wells Fargo markets itself as the quintessential Main Street lender, stressing the value of creating long-term relationships with customers over earning a quick buck. Courtney Hall worked as a Wells Fargo teller in New Jersey for almost six years.
