The Strategist

Wells Fargo will pay a record fine to CFPB

09/09/2016 - 14:43

One of the largest US banks Wells Fargo has been fined $ 185 million for the fact that its team opened more than 2 million accounts and credit cards without consent of customers. This was done to hit sales targets and receive bonuses. The bank has dismissed 5,3 thousand employees, who were suspected of involvement in fraudulent schemes.

Mike Mozart
Mike Mozart
On Thursday, the US Consumer Financial Protection Bureau (CFPB) reported that they have discovered "widespread illegal practices" in the US bank Wells Fargo. The bank's employees opened accounts without consent of customer, and imposed them services that they did not needed. The bank will have to pay a fine of $ 185 million, and a compensation to customers in the amount of $ 5 million. This is the largest fine the CFPB ever assigned. According to the regulator, Wells Fargo employees have brought more than 1.5 million accounts and 500 thousand credit cards without consent of customers. The CFPB reported that the bank employees opened bank accounts and credit cards, and even transferred funds from other customer accounts. The newly opened accounts and credit card were charged a monthly service fee. Why did they do it? To hit sales targets and receive bonuses for it. Employees also created fake email accounts with online banking to simulate sales higher than actual. The lawsuit was filed by a California prosecutor's office in November last year, in which it accused the bank that in imposition of services the customers did not request.

Wells Fargo is the largest US bank by market capitalization, the organization has 40 million retail customers. Wells Fargo employed 268 thousand people (in June), and recently dismissed 5,3 thousand employees participating in these schemes due to discovery of fraudulent accounts without consent of its clients. CFPB’s Director Richard Cordray said the situation occurred because of Wells Fargo’s corporate culture, which tolerated such "reckless, risky or questionable practices". "Obviously, it's unfair practices and malversation. The bank has created a program of rewards and incentives, which indirectly encouraged employees to resort to fraudulent practices in sales, and it seems, the bank not carefully supervised this program", - said Mr. Cordray. The bank’s statement reads: "We regret, and we take responsibility for cases in which customers can get products that they did not ask." 

Los Angeles Times newspaper told about aggressive plans of sales, which encouraged employees to the illegal activities, back in 2013. However, the bank is still demanding from its employees to expand sales as much as possible. On average, each individual has six different accounts in Wells Fargo.

Wells Fargo bank provides diversified financial and insurance services to 23 million customers. The group has more than 6 thousand branches in the US, Canada and Puerto Rico, and its number of employees exceeds 280 thousand. Headquarters of the banking group is located in Sioux Falls (South Dakota, United States).