Wells Fargo Bank has been ordered to pay $185 million in fines and penalties to settle what the Consumer Financial Protection Bureau calls “the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts”.
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Wells Fargo will also pay an additional $35 million penalty to the U.S. Office of the Comptroller of the Currency, and another $50 million to the city of Los Angeles and Los Angeles County.
Wells Fargo said in a statement that it has fired managers and employees “who acted counter to our values” in carrying out the schemes. “This extraordinary resolution sends a strong message – to big banks and consumers alike – that we’ll be vigilant in protecting consumer rights”. Wells, one of the largest banks in America and headquartered in Sioux Falls, South Dakota has four million customers.
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. Money in those accounts was transferred from the authorized accounts of customers without permission.
The end game for employees was to sell enough new products and open enough new accounts to meet company goals and trigger compensation bonuses. That led to customers being charged for insufficient funds or overdraft fees – because the money was not in the original accounts they had established.
In order to boost their sales numbers, employees opened 1.5 million deposit accounts and 565,000 credit card accounts on customers’ behalf but without authorization from those customers. The CFPB also confirmed that some employees went as far as creating fake pin numbers and e-mail addresses to enroll unsuspecting customers in online banking. It said in a statement: “Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us”. “Our entire culture is centered on doing what is right for our customers”. The bank said that “accounts refunded represented a fraction of one percent of the accounts reviewed, and refunds averaged $25”.
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Los Angeles City Attorney Mike Feuer reportedly described Wells Fargo’s behavior as “outrageous” and a “major breach of trust”. The federal agencies conducted their own investigations into the bank’s sales.
