26 September 2017
visit www.avoka.com

Wells Fargo fined $185m for opening millions of accounts without customers' knowledge

08 September 2016  |  9023 views  |  3 Wells Fargo

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.

Comments: (3)

Peter Robinson
Peter Robinson - Liberti Consulting - Northampton | 09 September, 2016, 12:39

5,300 'staffers' at it and Management weren't aware? Incredible.

With a level of abuse on that scale, I think they came off lightly.

1 thumb up! 1 thumb up! (Log in to thumb up)
Hitesh Thakkar
Hitesh Thakkar - FIS Payments Software and Services India - India | 09 September, 2016, 15:16

Agree @Peter. 2 million accounts opened by 5300 staffers can not be in single day and goes with out notice ( it must be done in few days or week ).

Apart from penalty and reversal loss, Wells will end up loose few loyal customers and brand value due to this incident.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 09 September, 2016, 16:19

This is atrocious. I've heard about incidents of "temporary transfers" of funds from authorised to unauthorised accounts with a few other banks as well. I hope I'm wrong but this may just be the tip of the iceberg in the banking industry. On a side note, I totally agree with @PeterRobinson - US$ 185M fine is a rounding error in the P&L of a bank of WF's size.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Wells Fargo hails video banking pilot

Wells Fargo hails video banking pilot

24 August 2016  |  7952 views  |  1 comments | 11 tweets | 22 linkedin
Wells Fargo promises faster credit for small business customers

Wells Fargo promises faster credit for small business customers

10 May 2016  |  6352 views  |  1 comments | 8 tweets | 4 linkedin
Wells Fargo creates innovation group

Wells Fargo creates innovation group

23 July 2015  |  10091 views  |  0 comments | 16 tweets | 10 linkedin

Related company news


Related blogs

Create a blog about this story (membership required)
download the paper nowvisit www.vasco.comvisit www.temenos.com

Top topics

Most viewed Most shared
AXA launches blockchain to cover late flight compensationAXA launches blockchain to cover late flig...
12255 views comments | 16 tweets | 30 linkedin
European Commission makes fintech a priority in supervisory shakeupEuropean Commission makes fintech a priori...
8855 views comments | 34 tweets | 46 linkedin
hands typing furiouslyBlockchain is a new way of thinking?
7569 views 2 | 10 tweets | 1 linkedin
German central bank flags DLT weaknessesGerman central bank flags DLT weaknesses
7306 views comments | 17 tweets | 19 linkedin

Featured job

circa £250K total package

Find your next job