Wells Fargo Fined $185 Million Over Phony Accounts

Wells Fargo, Naperville business law attorneyBanks and financial institutions are frequently at the forefront of controversy, which is a rather concerning reality. Nearly every American relies on some sort of banking entity to manage their personal and business transactions, so when a bank gets into trouble, it is often at the expense of its individual and corporate customers.

As an experienced business law attorney, I understand the importance of banking regulations and other practices that protect consumers from financial institutions looking to gain an undue advantage. That is why I was somewhat surprised to learn that one of the most well-known companies in the American banking industry has agreed to a settlement in which it will pay about $185 million in fines and penalties for defrauding customers by creating unauthorized accounts.

Repeat Customers and Upselling

San Francisco-based Wells Fargo has long been known for its ability to sell multiple banking products to the same individual customer. It turns out, however, that some of its repeat sales were never authorized by the customer. Instead, overzealous Wells Fargo employees allegedly created revenue-generating bank and credit card accounts without ever notifying the customers whose names were on the account. According to the Consumer Financial Protection Bureau, the accounts were created in secret by Wells Fargo employees looking to hit sales goals and receive bonuses.

Troublingly, the accounts were not simply generated by a few rogue employees. Wells Fargo claims that it has fired more than 5,300 individuals in the last few years as a result of such practices. The bank estimates that some 1.5 million deposit accounts and 500,000 credit card accounts may have been opened without customer approval. According to reports, an employee would open a new account, moving some of the customer’s money from an existing account into the new one. Not knowing the money was gone, customers would spend from the original account and would be charged overdraft fees and fees for insufficient funds.

Restitution and Penalties

The formal complaint against Wells Fargo was filed in May 2015 in California, but federal regulators have played a significant role in the process. This week, federal authorities, California prosecutors, and the bank agreed to a settlement that will put the matter to rest. While Wells Fargo did not explicitly admit or deny of the investigators’ conclusions, the company will pay $185 million in fines, including $100 million to the Consumer Financial Protection Bureau—the largest penalty collected by the agency in its five-year history. Wells Fargo also agreed to pay full restitution to any customer harmed by the actions of bank employees.

Seeking Legal Help to Protect Your Investments

When you are looking for a financial institution as a partner for your business venture, you need one that you can trust. It is also important to review any and all disclosures or contracts before entering into a working agreement with a bank so that you know exactly what to expect. An experienced Naperville business law attorney can help you understand your options for securing capital and working with a bank for your company’s needs. Call 630-756-1160 for a confidential consultation at The Gierach Law Firm today.

 

Sources:

Reuters

The New York Times

USA Today