Wells Fargo fined $185M for opening millions of unauthorized accounts

Wells Fargo Bank, N.A., one of the nation's largest banks, has been with $185 million in civil penalties for secretly opening millions of unauthorized deposit and credit card accounts in a bid to boost its finances, federal and state officials said Thursday.

Employees of Wells Fargo (WFC) boosted sales figures by covertly opening the accounts and funding them by transferring money from customers' authorized accounts without permission, the Consumer Financial Protection BureauOffice of the Comptroller of the Currencyand Los Angeles officials said.

An analysis by the San Francisco-headquartered bank found that its employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers, the officials said. Many of the transfers ran up fees or other charges for the customers.

The findings stem in part from a 2015 Los Angeles Superior Court lawsuit in which Los Angeles City Attorney Mike Feuer accused the bank of violating California unfair competition laws.

The civil action charged that Wells Fargo & Company and Wells Fargo Bank "have victimized their customers by using pernicious and often illegal sales tactics to maintain high levels of sales of their banking and financial products."

"Wells Fargo has known about and encouraged these practices for years," the lawsuit charged. "It has done little, if anything to discourage it employees' behavior and protect its customers"

The bank has agreed to pay full restitution to all victims and a $100 million fine to the Consumer Financial Protection Bureau's civil penalty fund. Wells Fargo will pay a separate $35 million penalty to the Office of the Comptroller of the Currency, and an additional $50 million to the city and county of Los Angeles.

"Wells Fargo employees secretly opened accounts to hit sales targets and receive bonuses," CFPB Director Richard Cordray said in a formal announcement of the penalties. "Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed."

The bank agreed to the filing of a CFPB consent order without admitting or denying legal conclusions reached by federal investigators.

“Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us," the bank said in a formal statement. "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 a review by a third-party consultant resulted in $2.6 million in refunds to customers for any fees associated with products the account holders "may not have requested." Accounts refunded represented a fraction of one percent of the accounts reviewed, and refunds averaged $25, Wells Fargo said.

As of June 30, Wells Fargo reported having more than $1.9 trillion in assets, third largest among U.S. banks. The bank has more than 8,600 locations and 13,000 automatic teller machines, as well as offices in 36 countries and territories.

Wells Fargo shares were up fractionally at $49.88 in afternoon trading.

KING


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