Wells Fargo has dismissed 5,300 employees and agreed to pay the largest fine ever collected by the federal government's new consumer protection agency following an investigation into allegations its staff opened more than 2 million fake checking, credit card and other accounts for customers in order to meet sales targets and earn bonuses.
Chasing "compensation incentives," employees at the nation's largest bank went as far as to create phony email addresses to enroll customers in online-banking services and issued them debit cards they didn't request, according to government regulators. The employees even created fake personal identification numbers in some cases.
The Wells Fargo employees would temporarily transfer money from customers' authorized accounts in order to create the fake accounts, racking up fees or other charges for the customers, the regulators alleged. The practice, which was pervasive, dates back to at least 2011, regulators claimed, and included thousands of employees.
"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," the federal Consumer Financial Protection Bureau said in a statement. "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."
The San Francisco-based bank, the largest in the country by market value, agreed on Thursday to pay a fine of $185 million to various state and federal agencies, including $100 million to the CFPB, the largest fine ever collected by that office. Other agencies included the Office of the Comptroller of the Currency and authorities representing Los Angeles.
CFPB Director Richard Cordray blamed Wells Fargo's company culture for allowing the "reckless, unsafe or unsound practices."
"Today's enforcement actions against Wells Fargo likely could have been prevented if the bank had a stronger compliance risk management program that fostered a more healthy culture, in which incentives aligned behaviors properly," he said.
It is not unusual for banks to attempt to persuade customers to sign up for multiple products. The industry has been under pressure amid historically low interest rates and tighter banking industry regulations following the 2008 financial and "cross selling" can be profit driver. But, according to regulators, Wells Fargo's program went much further and the bank did not monitor it closely.
"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," Cordray said in a statement.
Wells Fargo, which did not admit wrongdoing as part of the settlement, agreed to hire an independent consultant to review its procedures. It has also fired about 5,300 employees as part of the investigation. "Wells Fargo is committed to putting our customers' interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request," the company said in a statement.
The bank also agreed to repay $5 million to customers for fees they incurred after being signed up for products they did not request. Wells Fargo said it had already paid back $2.6 million of that.