Bank Ordered to Make Restitution
Last week, Wells Fargo Bank, N.A. was hit with a record $185 million in fines and penalties in connection with what the Consumer Financial Protection Bureau (CFPB) describes as the “widespread illegal practice of secretly opening unauthorized deposit and credit card accounts.”
According to the bank’s own analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers.
According to the CFPB, Wells Fargo developed an incentive-compensation program, but did not monitor the program carefully. Thousands of employees of the bank created unauthorized deposit and credit card accounts across the country in order to collect financial bonuses for themselves.
“Our entire culture is centered on doing what is right for our customers,” stated John Stumpf, Chairman and CEO of Wells Fargo & Company, in an email message to Wells Fargo team members. “However, at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action.”
Wells Fargo reached agreements with CFPB, the Office of the Comptroller of the Currency, and the Office of the Los Angeles City Attorney, from whence the civil action originated.
A $100 million fine will go to the CFPB’s Civil Penalty Fund. An additional $35 million penalty goes to the Office of the Comptroller of the Currency, and another $50 million to the City and County of Los Angeles.
Wells Fargo is also required to pay full restitution to all victims.
Prior to these settlements, Wells Fargo completed an extensive review by a third-party consulting firm going back into 2011. “Based on this review, we have refunded $2.6 million of fees associated with products customers may not have requested,” stated Stumpf.
Disciplinary actions, including terminations of managers and team members, were also taken in regard to review findings.
The agreement also requires Wells Fargo to work with an independent consultant to conduct a thorough review of its procedures to ensure proper sales practices.
“Today’s action should serve notice to the entire industry,” said Richard Cordray, Director of CFPB. “If the incentive compensation schemes or sales targets are implemented in ways that threaten harm to consumers and lead to violations of the law, then banks and other financial companies will be held accountable.”
“I have always believed that Wells Fargo’s unique culture set us apart, and all of our actions together keep Wells Fargo strong and vibrant,” said CEO Strumpf. “This includes the actions we take when issures arise. So, as difficult as today’s news is, this is an opportunity to recommit to ourselves to our customers, doing all that we can to put their interests first.”
