Wells Fargo to pay $187.5M for wrongfully opening customer accounts
Wells Fargo has agreed to pay $187.5 million to settle claims by federal regulators that the wirehouse wrongfully opened unauthorized bank and credit card accounts for more than 2 million customers.
The Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the Los Angeles City Attorney announced the massive settlement on Thursday.
Regulators said Wells opened roughly 1.5 million deposit accounts and 565,000 credit card accounts that may not have been authorized by consumers, according to the bank's own analysis.
The bank's employees also requested and issued debit cards without consumers' knowledge or consent, even creating PIN numbers without telling its customers, the CFPB said.
Wells Fargo employees also created fake email addresses to enroll customers in online banking services without their knowledge.
Wells had agreed to pay $2.5 million in restitution to victims as well as a $100 million fine to the CFPB, $35 million to the OCC and another $50 million to the city and county of Los Angeles.
"Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses," CFPB Director Richard Cordray said in a press release. "Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed. 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."
The bank's high-pressure sales tactics were first described in a December 2013 Los Angeles Times article that found employees forged signatures, falsified phone numbers and opened customer accounts without their permission.
The L.A. City attorney Mike Feuer sued the San Francisco bank last year alleging the sales tactics created a "fee generating machine" that led employees to open bogus accounts to meet strict quotas. A former Wells customer also filed suit last year alleging the bank defrauded customers and violated the Fair Credit Reporting Act.
Wells has a reputation for cross-selling products and services to existing customers. Regulators said the bank failed to monitor its compensation programs "with adequate care."
Employees signed up existing clients for credit cards, debit cards and deposit accounts and transferred funds without customers' authorization. Wells sometimes charged customers for insufficient funds or overdraft fees because the money was not in their original accounts.
Wells will refund consumers monthly maintenance fees, nonsufficient fund fees, overdraft charges, and other fees they paid because of the creation of the unauthorized accounts, the CFPB said. Consumers are not required to take any action to get refunds.
Wells also must hire an independent consultant to review its procedures and employees may be required to undergo ethical-sales training.
Wells said in a statement that it settled "in the interest of putting this matter behind us."
"Wells Fargo is committed to putting our customers' interests first 100% of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request," the company said.