San Francisco-based Wells Fargo & Co. was fined $185 million by local and federal authorities for “widespread illegal” sales practices that included opening as many as 2 million deposit and credit-card accounts without customers’ knowledge.
Emily Glazer of The Wall Street Journal had the news:
Employees at the bank, which has 40 million retail customers, in some instances issued debit cards without customers’ knowledge and assigned personal identification numbers without telling them, according to the U.S. Consumer Financial Protection Bureau. They also transferred funds from authorized customer accounts to temporarily fund ones without customer permission, according to the allegations, sometimes resulting in fees for insufficient funds.
Staffers also allegedly created fake email addresses, such as “noname@wellsfargo.com,” to enroll unknowing consumers or people who don’t exist in online-banking services to hit sales goals, the Los Angeles City Attorney’s office said.
Wells Fargo neither admitted nor denied the allegations but agreed to pay the fine and submit to a consent order to settle civil claims brought by the U.S. Office of the Comptroller of the Currency, the CFPB and the city attorney. In a release, the bank said the agreement was reached “consistent with our commitment to customers and in the interest of putting this matter behind us.”
Kevin McCoy of USA Today reports that the settlement stems from a lawsuit in Los Angeles:
The findings stem in part from a Los Angeles County Superior Court lawsuit filed last year in which Los Angeles City Attorney Mike Feuer accused the bank of violating California unfair competition laws.
The civil action charged that Wells Fargo Bank and its parent, Wells Fargo & Co., “victimized their customers by using pernicious and often illegal sales tactics to maintain high levels of sales of their banking and financial products.”
“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,” said CFPB Director Richard Cordray. He added that thousands of bank employees “misused consumer names and personal information to create new checking and credit card accounts to inflate their sales figures to meet their sales targets and claim higher bonuses.”
The bank agreed to pay full restitution to all victims and a $100 million fine to the Consumer Financial Protection Bureau’s civil penalty fund — the largest in the regulator’s five-year operating history. Wells Fargo will pay a separate $35 million penalty to the Office of the Comptroller of the Currency, and an additional $50 million to the city and county of Los Angeles.
James Rufus Koren of the Los Angeles Times notes the investigation came from a 2013 Times’ story:
Feuer credited a 2013 Times story for sparking his investigation.
His office sued the bank last year, alleging 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.”
Feuer’s suit caught the attention of federal regulators, who conducted their own investigations. The CFPB, citing an analysis by Wells Fargo, said bank employees may have opened as many as 1.5 million checking and savings accounts, and more than 500,000 credit cards, without customers’ authorization.
The investigations found that employees illegally transferred funds from genuine accounts into unauthorized ones, created PINs for unwanted debit cards and made up bogus email addresses to secretly sign customers up for online banking.
Richard Cordray, director of the CFPB, said Thursday that those actions were so abusive and so widespread that the agency levied its largest fine to date.
