Fifth Third hit with suit over fake accounts

The Consumer Financial Protection Bureau has filed a suit against Fifth Third Bank over allegations it opened accounts without customers’ knowledge or consent.

Specifically, the agency said the Ohio bank for several years, 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.

Similar to Wells Fargo’s fake accounts scandal, Fifth Third allegedly used cross-selling to increase the number of products and services it provided to existing customers. Employees were offered an incentive-compensation program to reward selling new products; performance ratings, and in some cases continued employment depended on meeting “ambitious sales goals,” the agency said.

Susan Zaunbrecher, Fifth Third’s chief legal officer, called the suit “unnecessary and unwarranted” in a statement and said the bank would “defend itself vigorously.”

According to the CFPB’s suit, Fifth Third took insufficient steps to detect and stop the conduct and to identify and remediate harmed consumers, despite knowing about it since at least 2008. Unapproved deposit accounts were opened for existing Fifth Third customers from at least 2010 through at least 2016, the bureau said, while unauthorized credit cards were issued from at least 2008 through at least 2016.

Despite recognizing a spike in unauthorized credit card issuances by at least 2009, the $169 billion bank “continued to emphasize sales and to maintain credit-card sales goals and incentive compensation,” the agency said.

Fifth Third also allegedly opened unauthorized Early Access lines of credit from at least 2010 through 2014, and the bank kept them open even after it stopped offering new Early Access lines of credit. Senior management was aware of the unauthorized openings by June of 2010, when they were notified of an increase in the number of calls by employees to the internal whistleblower hotline about the unauthorized openings.

Employees also enrolled consumers in online banking services without their knowledge or consent from at least 2010 to at least 2016, the CFPB said.

Fifth Third itself identified fewer than 1,100 affected accounts out of 10 million, representing about 0.01 percent of accounts opened between 2010 and 2016, and the CFPB hasn’t informed the bank of any others, Zaunbrecher said.

“These accounts involved less than $30,000 in improper customer charges that were ultimately waived or reimbursed to customers years ago,” Zaunbrecher said. “While even a single unauthorized account is one too many, we took appropriate and decisive action to address each situation.”

Zaunbrecher also denied that the bank’s compensation or incentive structures encouraged the opening of unauthorized accounts.

The CFPB suit, filed in federal district court in the Northern District of Illinois, alleges violations of 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.

Wells Fargo recently reached a $3 billion settlement with the Justice Department and the SEC over its fake accounts scandal. It had previously paid out $190 million in 2016 over its fake account scandals to the CFPB, the Office of the Comptroller of the Currency and the City and County of Los Angeles. The San Francisco bank was also fined $1 billion by the CFPB and OCC over its mortgage and auto loan practices in 2018.

Bank of America might be next in the CFPB’s sights, Bloomberg Law said: CFPB Director Kathleen Kraninger last fall declined to close an investigation into alleged fake account generation at the bank stretching back to 2014.

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