Wells Fargo has been fined a total of $185 million for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts, according to the Consumer Financial Protection Bureau (CFPB).
Spurred by sales targets and compensation incentives, employees boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often resulting in fees or other charges, the CFPB alleged.
In prepared remarks, CFPB Director Richard Cordray said, “Wells Fargo built an incentive-compensation program that made it possible for its employees to pursue underhanded sales practices, and it appears that the bank did not monitor the program carefully. Thousands of bank employees found ways to game the system by secretly signing up existing clients for new services that were never requested.”
According to the bank’s own analysis, employees opened more than 2 million deposit and credit card accounts that may not have been authorized by consumers.
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Wells Fargo will pay full restitution to all victims and a $100 million fine to the CFPB’s Civil Penalty Fund. The bank will also pay an additional $35 million penalty to the Office of the Comptroller of the Currency, and $50 million to the City and County of Los Angeles.
According to Cordray, Wells Fargo is paying the largest penalty the CFPB has ever imposed. He also warned this action should serve notice to the entire industry that financial incentive programs carry serious risks that can have serious legal consequences.
“Unchecked incentives can lead to serious consumer harm, and that is what happened here,” Cordray said. “We are not saying that companies cannot have incentive compensation structures. They are common enough in the industry and they can motivate positive behavior. But companies need to pay very close attention to make sure they have effective monitoring in place to ensure that consumers are protected.”