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Wells Fargo Will Pay $190 Million To Settle Customer Fraud Case

Wells Fargo will pay $185 million in penalties and $5 million to customers that regulators say were pushed into fee-generating accounts that they never requested.
Patrick Rucker and Dan Freed
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Stephanie Keith / Reuters

WASHINGTON, Sept 8  - Wells Fargo has long been the envy of the banking industry for its ability to sell multiple products to the same customer, but regulators on Thursday said those practices went too far in some instances.

The largest U.S. bank by market capitalization will pay $185 million in penalties and $5 million to customers that regulators say were pushed into fee-generating accounts they never requested.

“We regret and take responsibility for any instances where customers may have received a product that they did not request,” the bank said of a settlement reached Thursday with California prosecutors and federal regulators.

The Consumer Financial Protection Bureau will receive $100 million of the total penalties - the largest fine ever levied by the federal agency.

“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,” said CFPB Director Richard Cordray.

Los Angeles officials and the Office of the Comptroller of the Currency were also party to the settlement.

In a complaint filed in May 2015, California prosecutors alleged that Wells Fargo pushed customers into costly financial products that they did not need or even request.

Bank employees were told that the average customer tapped six financial tools but that they should push households to use eight products, according to the complaint.

The bank opened more than 2 million deposit and credit card accounts that may not have been authorized, the CFPB said Thursday.

Wells Fargo spokeswoman Mary Eshet said the bank fired 5,300 employees over “inappropriate sales conduct.” The firings took place over a five-year period, Eshet said, adding that the bank has 100,000 employees in its branches.

Wells Fargo regularly releases numbers about how many products it sells to customers, a practice it calls “cross-sell.” Its wealth and investment management unit, for example, sold 10.55 products per retail banking household in November 2015, up from 10.49 a year earlier, according to the bank’s annual 10-K financial filing.

In the second quarter, however, the bank changed how it tallies up some of those numbers and said it was considering more changes.

Piper Jaffray analyst Kevin Barker said he does not think the crackdown on Wells Fargo will have much of an impact on others in the industry.

“I think this is unique to Wells Fargo and their particular situation and how hard they push on cross-sell,” he said.

 

(Reporting By Patrick Rucker in Washington and Dan Freed in New York; Editing by Alan Crosby and Jonathan Oatis)

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Before You Go

12 Things Every Woman Should Know About Money
From Alexa von Tobel(01 of12)
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Diversify Your Investments“Don’t put all your eggs in one basket” can be applied to investing. Spread your money to minimize your risks if a company doesn’t perform as well as expected. This way, you’re also exposed to different assets and will get more gains for your future. Watch. (credit:Alamy)
From Suze Orman(02 of12)
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Make Small Changes To See Big ResultsOne of the biggest money hurdles is getting in control of your money. Instead of making drastic changes -- and falling off the wagon -- track your spending and incorporate new habits slowly. Do you go to the movies once a week? Try going every two weeks. Grab a coffee at Starbucks each morning? Brew your own twice a week. The small savings will add up. Watch. (credit:Alamy)
From Maria Bartimoro(03 of12)
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Know How Much To Save And How Much To InvestIf you’re ready to get your feet wet into the stock market, start slow and keep building. You want to be able to put your money into an account and not have to withdraw it. Forget rock-bottom savings account rates for all your money -- put 20 percent into a savings account and the other 80 percent into the stock market. As you get closer to retirement age -- and less willing to take risks with your retirement money -- the percentages will become 50/50. Watch. (credit:Alamy)
From Alexa von Tobel(04 of12)
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Take Advantage Of Compounding InterestToo often, women forget about the power of compounding interest. The earlier you start saving, the less you’ll have to save in your 40s and 50s for retirement. It’s not magic, just math. Watch. (credit:Alamy)
From Alexa von Tobel(05 of12)
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Negotiate A Higher SalaryIt’s critical to negotiate your salary -- no one else is going to do it for you. Research what people in similar industries and job roles are making, and present it to your supervisor. If your company can’t provide you with more money, you can still negotiate: can they provide you with more vacation days or allow you to work from home once a week? These extra perks might offset a lower paycheck. Watch. (credit:Alamy)
From Suze Orman(06 of12)
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Forget About Cashing In Your 401kIf you think of the money sitting in your 401k as an emergency fund or savings account, think again. Withdrawing money early will result in paying taxes just like you would your normal paycheck. Additionally, you will pay both a 10-percent federal tax penalty and a state tax penalty. Watch. (credit:Alamy)
From Trae Bodge(07 of12)
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Save Money On Your Online ShoppingMake saving money when shopping online a breeze with Bodge’s favorite app, Invisible Hands. This handy program does the price-checking research for you, and will alert you when a different site has a better price -- or let you know that you’ve found the best deal. Watch. (credit:Alamy)
From Maria Bartiromo(08 of12)
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Avoid Financial Rip-OffsWhen choosing what to invest your money in, if it looks too good to be true, it probably is. Remember that you’re investing and saving for the long term, not to get rich overnight. Watch. (credit:Alamy)
From Alexa von Tobel(09 of12)
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Decide Whether To Rent Or BuyBuying a home is not only an investment, but a permanent tie to a location. More importantly, it can limit job opportunities by making you location dependent. If you’re uncertain about whether you’ll be in the same city in 5-8 years, it’s best to rent. Watch. (credit:Alamy)
From Trae Bodge(10 of12)
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Cut Back On What You Want, Not What You NeedIdentifying what you need versus what you want is an easy way to cut back on spending. You need food -- but ordering out instead of eating the leftovers in your fridge is a want. By being honest with yourself about what you actually need to spend money on, you can start to save. Watch. (credit:Alamy)
From Maria Bartimoro(11 of12)
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Don’t Pay Down Debt With More DebtIf you’re trying to pay down debt, avoid taking on more debt -- forget taking out a loan or getting a new credit card to pay another off. Instead, keep paying off debt as your priority, and with each paycheck, add a few extra dollars to your payments. There are no shortcuts, but making on-time payments above the minimum will help you pay your balances as soon as possible. Watch. (credit:Alamy)
From Trae Bodge(12 of12)
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Save At The Grocery StoreWhen you’re shopping for groceries, look at the unit price, not just the price per item. While that box of cereal might be $1 cheaper than the other brand, it might also contain less. Use this strategy for boxed items, meats and cheeses -- you’ll save more than by just looking at size differences or brand. Watch. (credit:Alamy)
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