Wells Fargo dinged $185 million for creating fake accounts, LA Times investigation began case
The bank said that they have fired 5,300 employees who were somehow connected to the scheme to create fake bank and credit card accounts in order to reach sales goals
The Wells Fargo Bank, N.A was ordered to pay $185 million in fines and penalties by the Consumer Financial Protection Bureau after the bank was accused of secretly opening unauthorized deposit and credit card accounts. The scheme resulted in more than 2 million deposit and credit card accounts being created without the customer’s authorization.
Wells Fargo told CNNMoney that it had fired 5,300 employees related to the scheme.
“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.”
Wells Fargo said it has refunded $2.6 million to customers for any fees associated with products customers received that they may not have authorized.
Wells Fargo, as part of the agreement with the CFPB said they would, from now on, send customers a confirming email within one hour of opening any deposit account and send an application acknowledgement and decision status letter after a customer submits an application for a credit card. It also acknowledged that an unspecified number of managers and team members had been terminated or otherwise disciplined.
(See CFPB’s Consent Order – PDF.)
The scheme became public thanks in part to a Los Angeles Times investigation in 2013 into the practices at Wells Fargo. In 2015, LA City Attorney Mike Feuer filed a lawsuit that alleged that Wells Fargo “victimized their customers by using pernicious and often illegal sales tactics” including unrealistic quotas and policies that have “driven bankers to engage in fraudulent behavior.”
“In many cases, customers say they’ve had to pay fees related to accounts they never opened,” James Rufus Koren of the LA Times wrote today. “In a more extreme case, Mexican pop star Ana Bárbara this summer sued Wells Fargo, saying an employee opened up accounts without her knowledge then spent more than $400,000 in her name.”
The fines and penalties will be broken out this way: $100 million in penalties to the Consumer Financial Protection Bureau, $35 million to the Office of the Comptroller of the Currency, and $50 million to the City and County of Los Angeles.