Wells Fargo To Pay $185 Million In Fines, Fires 5,300 Employees For Opening Accounts Illegally

The Fines

Wells Fargo has been ordered to pay $185 million in fines: $100 million to the CFPB Civil Penalty Fund, $35 million to the Office of Comptroller of the Currency and $50 million to the City and County of Los Angeles. They will also be forced to pay full restitution to all victims due to the widespread practice of illegally and secretly opening unauthorized accounts.

In addition 5,300 employees have had their employment terminated as part of the internal review by Wells Fargo. To give you some idea of the scale of this, here are some statistics:

• 1.5 million deposit accounts were opened that may not have been authorized by account holders. This was done by employees opening new accounts and transferring funds to temporarily fund these accounts. This lead to insufficient funds sometimes being available to account holders and fees being charged for both insufficient funds and overdraft fees.
• 565,000 credit card accounts were opened that may have not been authorized. Customers may have incurred annual fees as well as other fees due to this practice.
• Undisclosed number of debit cards were issued and activated without authorization. Sometimes employees created fake PINs for these cards.
• Fake e-mail addresses were used to enroll customers in online banking without customers knowledge or consent.

What To Do If You Were Affected?

Customers that were affected do not need to do anything, Wells Fargo will be forced to pay full refunds to customers automatically. These refunds are expected to total $2.6 million.

Our Thoughts

This practice was obviously extremely widespread, it was also fairly common knowledge within the banking industry (LA times article from back in 2013 for example). The practice was occurring due to employees receiving financial incentives for reaching sales targets (often in excess of 15 new accounts per day) and adverse action for not reaching these targets.

It’s great news that CFPB have been able to heavily fine Wells Fargo for this practice and hopefully this sends a clear message to other financial institutions. It’s worth noting that this affected less than 1% of accounts though and the average fees for these accounts was $25.