By Jeff Bater
Sept. 8 — Wells Fargo will pay $185 million in penalties and $5 million in remediation over allegations its employees secretly opened unauthorized accounts to hit sales targets — tactics that left customers with overdraft charges and late fees.
The bank agreed to pay $100 million to the Consumer Financial Protection Bureau, $35 million to the Office of the Comptroller of the Currency, and $50 million to the city of Los Angeles, plus $5 million in remediation to customers.
Wells Fargo must also hire an independent consultant to conduct a thorough review of its procedures, and the CFPB said recommendations may include requiring employees to undergo “ethical-sales training.”
The $100 million penalty to the CFPB is the largest imposed by the regulator to date. The bureau said employees, spurred by sales targets and compensation incentives, boosted sales figures by covertly 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 CFPB investigation found that since at least 2011, thousands of Wells Fargo employees took part in the illegal acts and that many have since been terminated. Richard Cordray, the director of the CFPB, said that according to the bank’s own analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers.
“Employees funded the deposit accounts by transferring funds from existing accounts,” he said during a media call about the enforcement action. “As a result of these illegal deposit and credit card practices, many consumers were hit with annual fees, overdraft-protection charges, finance charges, late fees, and other costs.”
According to the CFPB consent order, the bank terminated roughly 5,300 employees for engaging in improper sales practices over a period starting at the beginning of 2011. As part of the settlement, the bank didn't admit or deny the findings of facts and conclusions of law.
The bank, based in Sioux Falls, S.D., is a subsidiary of financial services giant Wells Fargo & Co., which is headquartered in San Francisco.
In a statement, the company said the settlements were reached to put the matter behind it.
“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 statement said.
Comptroller of the Currency Thomas Curry said during the press call that the enforcement actions against Wells Fargo likely could have been prevented if the bank had a stronger compliance risk management program “that fostered a more healthy culture, in which incentives aligned behaviors properly.”
John Stumpf, the chairman of Wells Fargo & Co., said in an e-mail to employees Sept. 8 that the company has made improvements to sales practices and enhanced its training. “Wells Fargo’s culture is committed to the best interests of our customers, providing them with only the products they want and value,” he said.
In May 2015, following an investigation precipitated by a newspaper report, the Los Angeles city attorney's office sued Wells Fargo over allegations of unauthorized accounts. The city attorney, Mark Feuer, coordinated his suit with the CFPB and OCC, which conducted their own investigations.
“It's a major breach of trust if a bank transfers funds without the consent of consumers from an existing account to an unauthorized one,” Feuer said during the media call. “And any consumer should be outraged by that conduct. The actions we are taking today are designed to assure that in the future those actions are never taken by any bank ever.”
In the CFPB news release Cordray said the bureau's enforcement 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.”
To contact the reporter on this story: Jeff Bater in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Mike Ferullo in Washington at email@example.com
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