In addition, the Sioux Falls, S.D. -based bank says it is taking steps to keep this type of scheme from occurring again, noting that it will now send a customer an email confirmation shortly after a deposit account is opened.
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“Unchecked incentives can lead to serious consumer harm, and that is what happened here”, said Richard Cordray, head of the Consumer Financial Protection Bureau, in a statement.
According to the regulators, Wells Fargo employees opened around 1.5 million bank accounts and applied for 565,000 credit cards that might not have been authorised by customers.
For its alleged abuses of costumers’ trust and violations of consumer protection laws, Wells Fargo was hit with $185 million in fines, including a $100 million penalty from the CFPB, a record for the agency created after the financial crisis. According to the Los Angeles Times, employees opened the accounts to meet strict sales goals.
Wells Fargo stock is down about 8.5 percent on the year and remained little changed in early trading. The fake accounts then charged customers with “unwarranted fees”, which CNN Money claims boosted the employees’ sales figures.
Applying for credit-card accounts without consumers’ knowledge or consent, leading to annual fees, as well as associated finance or interest charges and other late fees for some consumers. A separate $35 million worth of penalty will be paid by the bank to the Office of the Comptroller of the Currency while it will also pay $50 million to the city and county of Los Angeles.
Customers have reported facing fees, overdraft charges and sometimes negative effects on their credit scores as a result of these false accounts.
“.financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.”
In terms of the 5,300 employees, it appears that bank managers were among those who were fired, but a Wells Fargo spokesperson declined to tell The New York Times if any senior-level executives were fired or implicated.
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A spokeswoman for Wells Fargo did not immediately respond to a request seeking the total number of New Jersey customers whose accounts were affected. $5 million has been set aside for customer refunds.
