U.S. regulators say Wells Fargo, one of the nation’s largest banks, opened about 1.5 million bank accounts and applied for 565,000 credit cards that may not have been approved or authorized by customers, according to details released by the U.S. Consumer Financial Protection Bureau (CFPB).
For its alleged abuses of costumers’ trust and violations of consumer protection laws, Wells Fargo was hit with $185 million in fines, including a $100 million penalty from the CFPB, a record for the agency created after the financial crisis. A primary driving factor behind the violations, the CFPB says, were the bank’s compensation programs for its employees that encouraged them to sign up existing clients for deposit accounts, credit cards, debit cards, and online banking.
The CFPB’s order against Wells Fargo includes the following violations:
- Opening deposit accounts and transferring funds without authorization, sometimes resulting in insufficient funds fees.
- Applying for credit-card accounts without consumers’ knowledge or consent, leading to annual fees, as well as associated finance or interest charges and other late fees for some consumers.
- Issuing and activating debit cards, going so far as to create PINs, without consent.
- Creating phony email addresses to enroll consumers in online-banking services.
“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,” said CFPB Director Richard Cordray.
The bank has fired at least 5,300 employees who were involved in these alleged practices that have been traced as far back as 2011.
The CFPB says that Wells Fargo must refund all affected consumers the sum of all monthly maintenance fees, nonsufficient fund fees, overdraft charges, and other fees they paid because of the creation of the unauthorized accounts. These refunds are expected to total at least $2.5 million. Consumers are not required to take any action to get refunds to which they are entitled.
Wells Fargo issued the following statement related to the CFPB order:
“Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us. Wells Fargo is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request.”
Here is the full response from Wells Fargo.
Here is the full text of the CFPB’s order.