Wells Fargo Pays Biggest Fine Ever to CFPB for Setting Up Fraudulent Accounts

Imagine discovering that your bank has been moving your funds into a bank account you never authorized. Or worse, a credit card account. Wells Fargo is under the Consumer Financial Protection Bureau’s microscope after its community banking division was caught opening fraudulent accounts at its customers’ expense.


On September 8, 2016, the Consumer Financial Protection Bureau announced its largest consent settlement with Wells Fargo after the consumer protection agency uncovered a widespread practice of opening fraudulent accounts in its customers’ names. The settlement includes full restitution to its customers, $100 million in fines, $35 million in penalties to the Office of the Comptroller of the Currency, and $50 million to Los Angeles. CFPB Director Richard Corday explains:

“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. 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.”

Understand the Wells Fargo Bank Account Scam

Wells Fargo’s own analysis uncovered the problem. Thousands of employees illegally opened accounts at consumers’ expense, without their knowledge or consent:

• Opening 1.5 million deposit-based bank accounts
  
• Applying for 565,000 credit card accounts
  
• Creating debit cards with made-up PINs
  
• Enrolling customers in online banking services using phony email addresses.
  

They transferred funds from the customers’ authorized accounts into the fraudulent accounts for a short time, and then closed the accounts. Their behavior cost consumers insufficient funds penalties, overdraft fees, interest charges, annual fees, and finance charges.

Cross-Selling As A Motive For Fraud

What would cause thousands of bank employees to break the rules and set up fraudulent accounts? Los Angeles’s city attorney says the abusive practices were a natural result from intense pressure from Wells Fargo to meet cross-selling goals. Employees’ salary and bonuses were based on their ability to get current customers to sign up for new accounts and services.

Changed Policies and Personnel at Wells Fargo

Wells Fargo’s agreement with CFPB goes beyond cash pay-outs though. The company has already fired 5,300 employees for acting “counter to our values.” The company is also significantly changing its policies to avoid future abuse by removing cross-selling incentives.

The community banking unit’s leader, Carrie Tolstedt is also retiring from the company. She’ll take with her $124.6 million in stock and options. Some commentators are calling on Wells Fargo to impose its “claw back” policy, to take back those bonuses. Otherwise, it appears that Tolstedt will be able to walk away with millions of customers’ money at the company’s expense.

Dani K. Liblang is a consumer protection attorney at The Liblang Law Office, P.C., in Birmingham, Michigan. If you have been taken advantage of by your bank, contact The Liblang Law Office, P.C. for a free consultation.