Wells Fargo fined $185m for opening millions of accounts without customers' knowledge
08 September 2016 | 9023 views | 3
Wells Fargo has been fined $185 million for opening up to two million unauthorised deposit and credit card accounts, issuing and activating debit cards without consent and creating phony email addresses to enrol people in online services.
The bank says that it has fired 5300 staffers over the scandal, which according to the Consumer Financial Protection Bureau (CFPB) was driven by sales targets and compensation incentives.
The CFPB has levied a $100 million fine, with the Office of the Comptroller of the Currency slapping Wells with another $35 million penalty and the City and County of Los Angeles $50 million.
Richard Cordray, director, CFPB, says: "Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses. Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed."
According to the CFPB, the bank has been positioning itself as a leader in "cross selling" - pushing savings and checking accounts, credit cards, debit and ATM cards, and online banking services to existing customers.
With compensation programmes in place, employees began playing the system. Wells Fargo's own analysis shows that employees opened around 1.5 million deposit accounts that may not have been authorised by customers. The staffers then temporarily transferred funds from authorised to unauthorised accounts to hit sales goals.
But customers were sometimes harmed because the bank charged them for insufficient funds or overdraft fees because the money was not in their original accounts.
Meanwhile, employees applied for about 565,000 credit card accounts that may not have been authorised by customers, some of which incurred annual fees.
Staffers also requested and issued debit cards without consumers’ knowledge or consent, going so far as to create PINs without telling the people. And phony email addresses were set up to enrol customers in online services without their knowledge or consent.
In addition to the fines, Wells Fargo has been told to refund all affected customers, something which is likely to cost at least $2.5 million. The CFPB has also ordered the bank to hire an independent consultant to conduct a review of its procedures.