Consumer protection agency fines Wells Fargo US $100 million

Consumer protection agency fines Wells Fargo US $100 million

The Consumer Financial Protection Bureau (CFPB) [official website], a federal agency entrusted with consumer protection in the financial sector, announced [press release] on Thursday a $100 million fine against banking giant Wells Fargo [corporate website] for widespread illegal sales practices. CFPB is authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act [text, PDF] to take action against those who violate consumer financial laws. Specifically, the CFPB consent order [order, PDF] requires Wells Fargo to pay full refunds to consumers, pledge their commitment to ensure proper sales practices, comply with various documentation and employee training requirements, and pay a $100 million fine. According to CFPB’s official statement [statement, text], Wells Fargo has been cited for a number of violations including but not necessarily limited to: 1) opening deposit accounts and transferring funds without authorization; 2) applying for credit-card accounts without customer consent thereby hiking up fees, interest and other finance charges; 3) issuing and activating debit cards, even going as far as creating PINs, without consent; and 4) creating phony email addresses to enroll consumers in online-banking services. CFPB stated that Wells Fargo had bonus and other incentive programs in place to encourage employees to enroll existing clients for deposit accounts, credit cards, debit cards and other banking products and services and the employees engaged in these unlawful practices in their attempt to win these incentives and achieve their compensation targets. CFPB Director Richard Cordray stated: “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.”

This is not the first time that the CFPB has taken action against a major bank. In April 2014 the CFPB ordered [JURIST report] another banking giant, Bank of America, to pay $727 million for its illegal credit card practices. Many fraud cases continue to be litigated eight years after the 2008 financial crisis. In March 2015 the DOJ criticized [JURIST report] the US Sentencing Commission after a federal panel introduced a proposal which would reduce prison time for white-collar criminals. In July 2014 Citigroup, Inc. agreed [JURIST report] to pay USD $7 billion to settle a federal inquiry into mortgage-backed securities sold by the bank prior to the financial crisis. In April 2014 the US Supreme Court granted certiorari [JURIST report] to hear a mortgage lending case in which Countrywide failed to provide required information and the borrowers attempted to rescind the loan. In February 2014 JPMorgan Chase paid [JURIST report] a USD $614 million settlement to the US government for its role in approving unqualified mortgages for government insurance.