Wells Fargo in hot water over fake accounts

The CFPB says that by the bank’s own estimates, Wells Fargo employees applied for roughly 565,000 credit cards and 1.5 million deposit accounts that may have not been authorized by consumers.

But what happened here instead is that 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.

These findings are somewhat linked to the 2015 Los Angeles Superior Court lawsuit in which the bank was accused by a Los Angeles City attorney of violating laws of unfair competition in California.

Bank employees were told that the average customer tapped six financial tools but that they should push households to use eight products, according to the complaint.

Wells Fargo, as part of the agreement with the CFPB said they would, from now on, send customers a confirming email within one hour of opening any deposit account and send an application acknowledgement and decision status letter after a customer submits an application for a credit card. “The bank has accepted these charges and takes responsibility of any instance where any of its products was forced on to its customers”. To date, Wells Fargo has the highest market valuation of any financial institution in the USA, with a worth of just over $250 billion.

The amount is fairly small for a company worth over $200 billion, but it is the largest fine paid to the CFPB since its 2011 inception.

The San Francisco-based bank will also pay US$50 million to the City of Los Angeles, which had filed suit past year, accusing the bank of pressuring employees into fraudulent behavior, such as opening fictitious accounts.

The Consumer Finance Protection Bureau has turned up its biggest scandal yet from financial giant Wells Fargo after federal regulators uncovered a wide-ranging scam by employees to collect fees from customers.

The phony accounts earned the bank unwarranted fees and allowed Wells Fargo employees to boost their sales figures and make more money.

Those illegal banking practices were widespread and pervasive at Wells Fargo, which on Thursday was fined $185 million, including a $100 million penalty from the Consumer Financial Protection Bureau, the largest such penalty the agency has ever issued.

Wells Fargo has always been the envy of the banking industry for its ability to sell multiple products to the same customer, but regulators on Thursday said those practices went too far in some instances.