Fifth Third Fined $20M Over Fake Accounts, Auto Repossessions
The Cincinnati bank must compensate roughly 35,000 harmed consumers. The CFPB settlement resolves a March 2020 lawsuit that asserted the bank created fake accounts and used a “cross-sell” strategy.
Dive Brief:
- The Consumer Financial Protection Bureau on Tuesday hit Fifth Third with $20 million in penalties — $15 million for allegedly opening unauthorized accounts in customers’ names and $5 million for allegedly forcing vehicle insurance onto borrowers who already had coverage.
- In addition to the penalties, Fifth Third must compensate roughly 35,000 harmed consumers, including 1,000 whose cars were repossessed. The CFPB is also banning the lender from setting sales goals that incentivize employees to open unauthorized accounts.
- “The CFPB has caught Fifth Third Bank illegally loading up auto loan bills with excessive charges, with almost 1,000 families losing their cars to repossession,” CFPB Director Rohit Chopra said in a prepared statement Tuesday. “We are ordering the senior executives and board of directors at Fifth Third to clean up these broken business practices or else face further consequences.”
Dive Insight:
The CFPB faulted Fifth Third on Tuesday for allegedly charging duplicate, unnecessary collateral protection insurance to more than 37,000 customers over nearly a decade.
More than half of the affected customers, charged between July 2011 and December 2020, had either maintained their coverage or obtained it within 30 days of the policy lapsing, the bureau said Tuesday.
Fifth Third threatened borrowers with delinquency, extra fees and repossession if they declined the coverage that was not required, the CFPB said. In some cases, the Cincinnati-based bank went ahead with vehicle repossessions when charges for unneeded coverage directly caused the borrower’s delinquency, the agency said.
Borrowers paid more than $12.7 million in unlawful fees related to car insurance, the CFPB said.
Additionally, when the duplicate coverage was canceled, Fifth Third applied the refunds to the consumers’ outstanding loan balances instead of refunding the money.
Fifth Third’s collateral protection insurance program was discontinued in January 2019, the bank said.
“Today’s settlement concludes both the sales practices litigation with the CFPB, and its separate investigation into certain auto finance servicing activities related to a collateral protection insurance program that the Bank shut down in 2019 before the CFPB began its investigation,” Susan Zaunbrecher, Fifth Third’s chief legal officer, said in a statement Tuesday.
The bank pledged to work with the bureau’s supervisory division to develop and implement plans to redress customers who have not yet been made whole.
The settlement also resolves a March 2020 lawsuit that claimed Fifth Third opened deposit and credit-card accounts in customers’ names without their consent as part of an aggressive cross-sell program between 2010 and 2016. The bank employees were evaluated and compensated, in part, based on the number of accounts they opened, and in some cases, they were fired if they couldn’t meet their goals.
“Reasonable sales goals and performance incentives are not inherently harmful,” the CFPB said in 2020. “But when such programs are not carefully and properly implemented and monitored, they may create incentives for employees to engage in misconduct in order to meet goals or earn additional compensation.”
Fifth Third, of course, is not the only bank to become ensnared in scandal over the opening of unauthorized accounts. Wells Fargo has paid billions of dollars since 2016 in connection with a fake-accounts scandal that prompted the Federal Reserve to impose a cap on the bank’s growth.
Fifth Third has also faced previous penalties from the CFPB. The bank in 2015 was ordered to pay $18 million to Black and Hispanic borrowers over perceived discrimination in auto loan pricing and $3 million over illegal credit card practices to harmed consumers, in addition to a $500,000 fine.