Fifth Third Bank, National Association need not look hard to understand the legal and regulatory trouble it could be in if allegations brought by the Consumer Financial Protection Bureau hold true.
A complaint filed Monday by the CFPB in federal district court in the Northern District of Illinois alleges Fifth Third engaged in many of the same unauthorized accounts practices that continue to plague embattled megabank Wells Fargo. According to the CFPB’s allegations, Fifth Third for several years and without consumers’ knowledge or consent:
- Opened deposit and credit-card accounts in consumers’ names;
- Transferred funds from consumers’ existing accounts to new, improperly opened accounts;
- Enrolled consumers in unauthorized online-banking services; and
- Activated unauthorized lines of credit on consumers’ accounts.
Like Wells Fargo, Fifth Third, for years and continuing through at least 2016, allegedly used a “cross-sell” strategy to increase the number of products and services it provided to existing customers. To increase its sales, “Fifth Third also used an incentive-compensation program that rewarded managers and their subordinate employees for selling new products and services to existing customers,” the complaint alleges.
“Reasonable sales goals and performance incentives are not inherently harmful,” the agency said. “But when such programs are not carefully and properly implemented and monitored, as the Bureau alleges here, they may create incentives for employees to engage in misconduct in order to meet goals or earn additional compensation.”
The CFPB alleges Fifth Third also had insufficient internal controls. Despite knowing since at least 2008 that employees were opening unauthorized consumer-financial accounts, “Fifth Third took insufficient steps to detect and stop the conduct and to identify and remediate harmed consumers,” the complaint alleges. “In short, Fifth Third focused on its own financial interests to the detriment of consumers.”
The CFPB alleges Fifth Third violated the Consumer Financial Protection Act’s prohibition against unfair and abusive acts or practices, as well as the Truth in Lending Act and the Truth in Savings Act and their implementing regulations. The Bureau seeks an injunction to stop Fifth Third’s unlawful conduct, redress for affected consumers, and the imposition of a civil money penalty.
“Fifth Third Bank respects and values the important role that the CFPB plays in protecting consumers but believes that the civil suit filed today is unnecessary and unwarranted,” said Susan Zaunbrecher, chief legal officer of Fifth Third Bank, in a statement. “The Bank will defend itself vigorously and is confident in the outcome.”
Of note, Wells Fargo was fined $100 million by the CFPB in 2016 for secretly opening unauthorized accounts. That pales in comparison to the $3 billion settlement the bank reached last month with the Securities and Exchange Commission and Department of Justice in the aftermath of the fake account scandal. Wells Fargo continues to face regulatory pressure regarding the scandal, including several hearings in front of the House Financial Services Committee scheduled this month.