The Consumer Financial Protection Bureau (CFPB) fined Wells Fargo Bank, N.A. $100 million for secretly opening unauthorized deposit and credit card accounts.
Spurred by sales targets and compensation incentives, employees boosted sales figures by opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges, a release from the federal agency stated.
The practices also impacted business customers the bank stated.
The news was a blow to the reputation of Wells Fargo, which has been considered among the best managed among the “too big to fail” giant banks. Its success in cross-selling customers services and products had long been lauded by Wall Street.
According to the bank’s analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers.
Wells Fargo, which has branch offices and other operations in Delaware, issued the following statement:
“Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us. Wells Fargo is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request.
The company said it took disciplinary actions, including termination for managers and team members involved in the practices.
In a message emailed to all Wells Fargo team members, the company said “Our entire culture is centered on doing what is right for our customers. However, at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action. Today’s agreements are consistent with these beliefs.”
Wells Fargo will pay full restitution to all victims and a $100 million fine to the CFPB’s Civil Penalty Fund. The bank will also pay an additional $35 million penalty to the Office of the Comptroller of the Currency, and another $50 million to the City and County of Los Angeles, which had investigated the practices.
“Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,” said CFPB Director Richard Cordray. “Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed. Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.”
The agency cited a cross-selling culture of banking products that the financial services company did not adequately monitor.
According to today’s enforcement action, thousands of Wells Fargo employees illegally enrolled consumers in these products and services without their knowledge or consent in order to obtain financial compensation for meeting sales targets.
According to the bank’s own analysis, employees opened roughly 1.5 million deposit accounts that may not have been authorized by consumers. Employees then transferred funds from consumers’ authorized accounts to temporarily fund the new, unauthorized accounts.
This widespread practice gave the employees credit for opening the new accounts, allowing them to earn additional compensation and to meet the bank’s sales goals. Consumers, in turn, were sometimes harmed because the bank charged them for insufficient funds or overdraft fees because the money was not in their original accounts.
The same practices were used in opening credit card and debit card accounts.
