Employees also issued debit cards without customers’ knowledge, even creating fake email addresses to unknowingly sign up consumers to online-banking services, the regulator said.
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Bank employees were told that the average customer tapped six financial tools but that they should push households to use eight products, according to the complaint. Another $5 million must be doled out to customers. For banking giant Wells Fargo, hit with the largest fine ever meted out by the Consumer Financial Protection Bureau, the response includes firing 5,300 employees amid a pledge to redouble its efforts to foster a corporate culture of compliance and ethics. The investigation also showed 14,000 of accounts created were exposed to $400,000 in annual fees and overdraft charges.
The $180 million penalty is for the Office of the Comptroller of the Currency, Consumer Financial Protection Bureau, and the Los Angeles City Attorney.
Applying for credit card accounts without authorization: According to the bank’s own analysis, Wells Fargo employees applied for roughly 565,000 credit card accounts that may not have been authorized by consumers.
Richard Cordray, director of the CSFB commented: “Wells Fargo built an incentive-compensation program that made it possible for its employees to pursue underhanded sales practices, and it appears that the bank did not monitor the program carefully”. The CNN report notes that Los Angeles had sued Wells Fargo over this practice a year ago (hence LA being a part of the settlement fines), but having such a widespread scam going on is somewhat astounding.
Wells Fargo & Co. will pay $185 million to resolve claims that bank employees opened deposit and credit-card accounts without customers’ approval to satisfy sales goals and earn financial rewards, US regulators said.
Regulators state that employees transferred customers’ funds from legitimate accounts to newly-created ones without customer knowledge or consent.
Wells Fargo’s website lists no banks in West Virginia, with only one in western Ohio. In a statement, Wells Fargo said understanding the context was important.
Wells Fargo confirmed that the 5,300 firings took place over several years.
Cordray’s agency said that Wells Fargo had been ordered to refund all fees and surcharges associated with the unauthorized accounts, and estimated the total amount due to customers at a minimum of $2.5 million.
It’s not clear when Wells Fargo hired a consulting firm to investigate the allegations. Los Angeles City Atty.
The bank did not admit any wrongdoing in the settlements, but it apologized to customers and announced steps to change its sales practices. Sandbagging meant employees would fail to open accounts requested by customers and instead accumulate a number of account applications to be opened on a later day.
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“How does a bank that is supposed to have robust internal controls permit the creation of over a half-million dummy accounts?” asked Vladeck.
