Wells Fargo is facing $185 million in civil penalties for secretly opening millions of unauthorized deposit and credit card accounts that harmed customers, federal and state officials say. The motive, according to regulator, was to hit sales targets and compensation incentives.
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The bank opened more than 2 million deposit and credit card accounts that may not have been authorized, according to the CFPB.
The settlement with Wells Fargo is on top of at least $135 million in penalties that the bank has also agreed to pay to two federal agencies over similar allegations.
In addition to the $100 million fine, Wells Fargo will pay $50 million to the city and county of Los Angeles, and another $35 million penalty to the Office of the Comptroller of the Currency.
It’s also on the hook to pay full restitution to all victims of the scheme.
“Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us”, the company said in a prepared statement.
Company officials said 5,300 employees were fired over a five-year period for their involvement in the scheme.
Wells Fargo, like many banks, has been pushing customers to use multiple financial products it runs, a common practice called “cross-selling”. The bank said that “accounts refunded represented a fraction of one percent of the accounts reviewed, and refunds averaged $25”.
“This is a major victory for consumers”, said Los Angeles City Attorney Mike Feuer, whose office sued Wells Fargo in 2015 after a Los Angeles Times investigation into the fake accounts. “This extraordinary resolution sends a strong message – to big banks and consumers alike – that we’ll be vigilant in protecting consumer rights”. Thousands of bank employees found ways to game the system by secretly signing up existing clients for new services that were never requested.
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That’s exactly what happened to Wells Fargo customers nationwide.
