Since at least 2011, Wells Fargo employees have been creating fake accounts using customers’ identities to boost their sales numbers, federal regulators said on Thursday.
The Consumer Financial Protection Bureau (CFPB) fined the bank $100 million after a third-party consulting firm found that 2 million fake deposit and credit card accounts had been made without the consent of the person whose name was on the account. According to CNN Money,the bank fired 5,300 employees for taking part in the scheme, which constitutes about 1 percent of the bank’s payroll.
In order to boost their sales numbers, employees opened 1.5 million deposit accounts and 565,000 credit card accounts on customers’ behalf but without authorization from those customers. “Employees then transferred funds from consumers’ authorized accounts to temporarily fund the new, unauthorized accounts,” the CFPB wrote. “This widespread practice gave the employees credit for opening the new accounts, allowing them to earn additional compensation and to meet the bank’s sales goals.”
In the meantime, customers real accounts were temporarily drained, leaving them with insufficient funds charges and overdraft fees.
The CFPB also noted that employees were issuing and activating debit cards without authorization, "going so far as to create PINs without telling consumers." In addition, some employees created fake e-mail addresses to sign customers up for online banking programs without their knowledge.
In a statement on its website, Wells Fargo wrote that it “is committed to putting our customers’ interests first 100 percent of the time.”
“We regret and take responsibility for any instances where customers may have received a product that they did not request,” the company added.
Wells Fargo refunded the fees to the harmed customers, in a payment totaling $2.6 million, with $25 in refunds per customer on average. The company also said it would invest in “enhanced team-member training and monitoring and controls” and focus on performance goals based on customer satisfaction.
In a statement, CFPB Director Richard Cordray said, “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.”
In addition to the $100 million fine the CFPB levied on it, Wells Fargo will also have to pay the City and County of Los Angeles $50 million as well as a $35 million fine to the Office of the Comptroller of the Currency.
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