California and federal regulators today fined Wells Fargo Bank (WFC), one of the U.S. largest banks, $185 million in civil penalties to resolve claims that bank employees secretly opened millions of unauthorized accounts for their customers in order to meet aggressive sales goals.
Thousands of employees at Wells Fargo opened roughly two million bank accounts and applied for 565,000 credit cards without customers’ knowledge or consent. In some cases, bank employees created fake email addresses to sign up customers for online banking services, accumulating late fees on accounts they never even knew they had.
The Consumer Financial Protection Bureau (CSFB) blamed Wells Fargo’s aggressive sales tactics. The federal consumer watchdog said employees at the world’s most valuable bank, which serves around 40 million retail customers, had been motivated to open the unauthorized accounts by compensation policies that rewarded them for drumming up new business.
The lender said it conducted a comprehensive review of its sales practices five years ago and it had taken “disciplinary actions, including terminations of managers and team members who acted counter to our values”.
Record multi-million fines
Richard Cordray, director of the CSFB, commented: “Wells Fargo built an incentive-compensation program that made it possible for its employees to pursue underhanded sales practices, and it appears that the bank did not monitor the program carefully.”
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“Employees misused consumer names and personal information to create new checking and credit card accounts to inflate their sales figures to meet their sales targets and claim higher bonuses,” he added.
The San Francisco-based bank will pay $100 million to the Consumer Financial Protection Bureau— the largest fine ever levied by the CFPB. It also will pay an additional $35 million to the Office of the Comptroller of the Currency, $50 million to the City and County of Los Angeles and $2.5 million to affected customers.
In addition, the bank has agreed to hire an independent consultant to review its procedures. Wells Fargo had set aside $5 million as the bank on the hook to pay full restitution to all victims of the scheme.
About 5,300 Wells Fargo workers, representing roughly 1% of the total workforce, have lost their jobs over their involvement with the unauthorized accounts.
“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,” the bank said in a statement.
“Our entire culture is centred on doing what is right for our customers. However, at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action. Today’s agreements are consistent with these beliefs,” they added.