Wells Fargo Fined $185 Million Over Creation Of Fake Accounts For Bonuses
Sep 09 2016
Wells Fargo spokeswoman Mary Eshet said the bank fired 5,300 employees over "inappropriate sales conduct".
The bank will also pay a US$35 million fine to banking regulators at the Treasury Department in addition to fully compensating all customers concerned, the CFPB said in a statement.
Money reported that federal regulators said the employees secretly created millions of bank and credit card accounts that were not authorized by customers since 2011.
Representatives from the bank allegedly set up false email addresses and pin numbers as well, per the CFPB statement.
Wells Fargo said in a release that the agreements were reached "consistent with our commitment to customers and in the interest of putting this matter behind us". In some instances, customers faced charges for insufficient funds or overdraft fees because the balances in their old accounts had been drained.
"Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed", said CFPB Director Richard Cordray. In 2015, Los Angeles City Attorney Mike Feuer filed a lawsuit against Wells Fargo, alleging that the bank "victimized their customers by using pernicious and often illegal sales tactics", and that the bank's policies had "driven bankers to engage in fraudulent behavior", according to the Times.
Getty Robin Beck
The bank will pay $5 million in customer remediation, and as a result of a third-party review, the bank claims to have refunded customers $2.6 million for unwarranted fees. To increase this cross-selling, the bank offers incentives to employees who are successful in signing up customers for other products or services.
After creating the accounts, employees transferred funds from consumers' authorized accounts to temporarily fund the new, unauthorized accounts. The $5.8 million Ferguson Empowerment Center, which is under construction at the former QuikTrip at 9420 W. Florissant Ave., will house multiple nonprofit organizations, providing employment assistance and training, financial literacy and asset building, counseling services and entrepreneurship training. Wells Fargo & Company was ranked No. 27 on Fortune's 2016 rankings of America's largest corporations.
Wells also must hire an independent consultant to review its procedures and employees may be required to undergo ethical-sales training.
"But sanctions on one bank are not enough - we need to crack down on the hostile work conditions and predatory sales metrics that hurt underpaid bank workers like me and our consumers alike". According to the Los Angeles Times, employees opened the accounts to meet strict sales goals.
The settlement was announced today in a news statement from Wells Fargo.
The bank reported in the second quarter that retail customers maintained an average of 6.27 products per household.