Commentary

CFPB Charges Fifth Third Bank With Enabling Illegal Cross-Selling

In a scheme reminiscent of the Wells Fargo scandal, the Consumer Financial Protection Bureau (CFPB) has charged Cincinnati, Ohio-based Fifth Third Bank with allowing employees to open unauthorized accounts for customers and then transferring funds from other accounts without their owners’ consent.

“The federal agency says Fifth Third’s abusive behavior happened from 2008 until 2016 as part of a long-running ‘cross-sell’ strategy. Instead of having ‘reasonable sales goals,’ federal officials said Fifth Third effectively goaded employees to break rules, while the bank turned a blind eye,” Alexander Coolidge writes  for the Cincinnati Enquirer.

“The Bureau is asking the federal court to grant an injunction to stop Fifth Third’s unlawful conduct, redress for affected consumers, and the imposition of a civil money penalty.”

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The civil lawsuit was filed  Monday in U.S District Court, Northern District of Illinois, Eastern Division.  

“Branch employees were given sales goals and sometimes told their jobs depended on their ability to meet them, the CFPB alleged in the lawsuit. Employees earned money for hitting certain sales targets, according to the lawsuit. The agency said Fifth Third employees opened accounts and lines of credits without customer consent to meet those goals and sometimes transferred customer funds into the unauthorized accounts,” Orla McCaffrey writes  for The Wall Street Journal.

“Once the employee was credited for the sale, the money was moved back. However, moving money without a customer's consent is a violation of the Truth in Savings Act,” the AP reports  on MarketWatch.

The bank issued  a statement carrying the headline: “Fifth Third Bancorp Rejects Charges in CFPB’s Civil Lawsuit.” It claims that a minuscule number of accounts -- approximately 0.01% -- are involved.

“Calling the CFPB’s suit ‘unnecessary and unwarranted,’ [Fifth Third Bank] acknowledged ‘a limited and historical event’ but said it was addressed,” Reuters’ Katanga Johnson reports.

“Fifth Third’s compensation and employee incentive structure does not reward retail employees for opening unauthorized accounts, nor does it give them sales quotas or product-specific targets,” Fifth Third’s chief legal officer, Susan Zaunbrecher states. “Our controls are designed to prevent and detect unauthorized account openings.”

“After an investigation spanning more than three years and involving nearly half a billion pieces of data produced by the Bank, the CFPB has not informed us of any unauthorized accounts beyond the fewer than 1,100 accounts that the Bank itself identified out of 10 million,” she adds.

Despite being under siege under the Trump Administration, the CFPB appears to still have some teeth.

“‘My instinct is there are more actions coming’ against banks, said Graham Scott Steele, director of the Corporations and Society Initiative at Stanford University's business school…. Steele noted that Fifth Third ‘always had a reputation for being aggressive’ on consumer sales practices,” Kate Berry writes for American Banker.

“A 2016 survey of front-line bank workers conducted by Anastasia Christman, worker power program director at the National Employment Law Project, found that Fifth Third was one of multiple banks that had engaged in practices similar to those at Wells Fargo,” Berry adds.

“It became clear that this strategy for growth was widespread across much of the industry,” Christman said, Berry reports. “Fifth Third was among the banks that employees complained about.”

“Ambitious sales goals are ‘not inherently harmful,’ the consumer bureau said in its complaint, but without sufficient supervision, they can create incentives for employees to act unethically to increase their compensation or protect their jobs. Fifth Third ‘failed to take adequate steps to detect and stop’ such misbehavior, the bureau said,” Stacy Cowley writes  for The New York Times.

“Fifth Third, one of the Midwest’s largest consumer banks, operates 1,100 branches in 10 states and holds around $410 billion in customer assets. Until late last year, it operated as a state-chartered bank and was primarily overseen by state regulators and the Federal Reserve Bank of Cleveland. In November, Fifth Third became nationally chartered and fell under the supervision of the Office of the Comptroller of the Currency.”

Meanwhile, just days after a House committee report found Wells Fargo has been too slow to reform itself in the wake of a series of scandals, the bank’s chairwoman, Elizabeth (Betsy) Duke, and another board member, James Quigley, have resigned. 

“Both Quigley and Duke were scheduled to appear before the House Financial Services Committee on Wednesday. It wasn’t immediately clear if they are still expected to testify. Last week, Democrats on that committee released an investigative report called ‘The Real Wells Fargo: Board & Management Failures, Consumer Abuses and Ineffective Regulatory Oversight,’” Brakkton Booker writes  for MPRNews.

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