James Rufus Koren
September 8, 2016
Calling it “outrageous” and “a major breach of trust,” local and federal regulators hammered Wells Fargo & Co. for a pervasive culture of aggressive sales goals that pushed thousands of workers to open as many as 2 million accounts that bank customers never wanted.
Those practices, first uncovered by the Los Angeles Times in 2013, led to a massive $185-million settlement package announced Thursday.
The settlements put to rest a lawsuit filed last year by Los Angeles City Atty. Mike Feuer as well as investigations by two federal regulators: the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.
The bank did not admit any wrongdoing in the settlements, but it apologized to customers and announced steps to change its sales practices. It will pay $100 million to the CFPB — the largest fine the federal agency has ever imposed — as well as $50 million to the city and county of Los Angeles and $35 million to the OCC.
The bank will also pay refunds to customers who paid fees on accounts they never wanted.
Feuer on Thursday called the settlements a big win for consumers.
“It’s outrageous for a bank to use a customer’s private information without permission to open an unwanted account,” he said. “Customers must be able to trust their banks.”
Feuer credited a 2013 Times story for sparking his investigation.
His office sued the bank last year, alleging Wells Fargo “victimized their customers by using pernicious and often illegal sales tactics,” including unrealistic quotas and policies that have “driven bankers to engage in fraudulent behavior.”
Feuer’s suit caught the attention of federal regulators, who conducted their own investigations. The CFPB, citing an analysis by Wells Fargo, said bank employees may have opened as many as 1.5 million checking and savings accounts, and more than 500,000 credit cards, without customers’ authorization.
The investigations found that employees illegally transferred funds from genuine accounts into unauthorized ones, created PINs for unwanted debit cards and made up bogus email addresses to secretly sign customers up for online banking.
Richard Cordray, director of the CFPB, said Thursday that those actions were so abusive and so widespread that the agency levied its largest fine to date.
“It reflects the severity of these violations, the breadth of the unfair and abusive practices and how seriously we take them,” Cordray said. “We found this conduct to be quite surprising.”
The bank had consistently said such practices were not widespread and that workers who cheat to meet sales goals are disciplined or fired. The CFPB said 5,300 workers have been fired for improper sales practices since 2011.
In a statement Thursday, Wells Fargo confirmed the settlements and said it has set aside $5 million to cover refunds to customers. The bank hired an outside firm that looked for potentially bogus accounts, a process that was finalized before the settlements were announced.
The bank said it has already provided refunds to about 100,000 customers, paying a total of $2.6 million so far with payments averaging $25.
“Wells Fargo is committed to putting our customers’ interests first 100% 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 its statement.
The bank will send notices to customers asking them to stop by a branch so that employees can help “close any accounts or discontinue services you do not recognize or want.”
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