Wells Fargo fined $185 million for opening bogus accounts

Wells Fargo & Co., the largest US bank by market value, must pay $185 million related to a regulatory enforcement action over “widespread illegal practice” around account openings, sales targets and compensation incentives, according to regulators and prosecutors.

An analysis by the San Francisco-headquartered bank found that its employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers, the officials said.

Wells Fargo, the largest bank in the world in terms of market capitalization, was just handed the largest fine in the history of the Consumer Financial Protection Bureau, a government watchdog set up in the wake of the 2008-09 financial crisis, according to a statement from the CFPB. The bank will have to pay $35 million to the Office of the Comptroller of the Currency, and another $50 million to the City of Los Angeles – bringing its total penalty to $185 million.

Thursday’s action demands that Wells pay full restitution to all victims and a $100 million fine to the CFPB’s Civil Penalty Fund.

The federal agencies conducted their own investigations into the bank’s sales tactics.

The council recently budgeted about $5.8 million to fund such a division in Feuer’s office.

The way it worked was that employees moved funds from customers’ existing accounts into newly-created accounts without their knowledge or consent, regulators say.

Wells Fargo & Co closed down -0.37 points or -0.73% at $50.43 with 1,70,17,066 shares getting traded on Thursday.

In a statement, Wells Fargo said it “reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us”.

Wells said it has refunded $2.6 million to affected customers for monthly maintenance fees, insufficient fund fees, overdraft charges and other fees paid because of the creation of the unauthorized accounts.

Wells Fargo is being slapped with the largest penalty since the CFPB was founded in 2011.

The CFPB’s action comes hard on the heels of revelations that the bank misapplied student loan payments to maximize fee income.

Wells Fargo entered eastern USA markets in 2008, when it bought Charlotte-based Wachovia.

The bank added new language to its last annual report, stating that its “approach to cross-sell is needs-based as some customers will benefit from more products, and some may need fewer”. The institutional investor held 10.19M shares of the major banks company at the end of 2016Q2, valued at $492.81M, up from 10.02M at the end of the previous reported quarter.

Piper Jaffray analyst Kevin Barker said he does not think the crackdown on Wells Fargo will have much of an impact on others in the industry.

Wells Fargo regularly releases numbers about how many products it sells to customers, a practice it calls “cross-sell”.