NAFCU reacted to the $185 million fine of Wells Fargo by California and federal regulators for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts.
NAFCU President and CEO Dan Berger said, “Wells Fargo’s illegal sales practices are an egregious violation of consumer trust. To open more than 1.5 million likely unauthorized consumer deposit accounts and more than 500,000 credit card accounts is despicable, and it’s flat-out fraud. Someone needs to go to prison,” Berger said. “To put an end to this type of behavior, there has to be personal accountability. Consumers deserve better; our country deserves better. Did the banks not learn anything from the financial crisis they caused?”
Berger added, “Credit unions — not-for-profit, member-owned financial institutions — have their members’ best interests at heart. By contrast, Big Banks and Wall Street banks are clearly driven by their shareholders’ interests at any cost. The flagrant disregard exhibited by Wells Fargo for their customers’ trust confirms that.”
The NAFCU statement also noted the wide recognition of credit unions by lawmakers and regulators for not creating the financial crisis and for their prudent business model.
A release from the CFPB read, “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 racking up fees or other charges.”
According to the bank’s own analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers. 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 another $50 million to the City and County of Los Angeles.
According to the Associated Press, the story series prompted the Los Angeles City Attorney office to sue Wells Fargo over its tactics. Roughly, 5,300 employees at Wells Fargo were fired in connection with this behavior, according to Los Angeles City Attorney’s office.
“Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,” 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.”
The Dodd-Frank Wall Street Reform and Consumer Protection Act prohibit unfair, deceptive, and abusive acts and practices.
Wells Fargo’s violations and penalties include opening deposit accounts and transferring funds without authorization. Employees opened roughly 1.5 million unauthorized deposit accounts. Employees then transferred funds from consumers’ authorized accounts to fund the new, unauthorized accounts temporarily. 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. Consumers, in turn, were sometimes harmed because the bank charged them for insufficient funds or overdraft fees because the money was not in their original accounts.
In addition, Wells Fargo employees applied for roughly 565,000 unauthorized credit card accounts. On those unauthorized credit cards, many consumers incurred annual fees, as well as associated finance or interest charges and other fees.
Wells Fargo must refund all affected consumers the sum of all monthly maintenance fees, nonsufficient fund fees, overdraft charges, and other fees they paid because of the creation of the unauthorized accounts. These refunds expected to total at least $2.5 million. Consumers are not required to take any action to get refunds to which they are entitled.
