A popular U.S. bank has been ordered to face repercussions for participating in “a range of illegal activities” that harmed about 35,000 of its customers, according to the Consumer Financial Protection Bureau.
Fifth Third Bank (FITB) is being hit with a $20 million fine by the CFPB after it found that the bank forced thousands of its customers to buy unnecessary auto insurance policies despite already having one. This led to the bank charging them illegal duplicative fees that resulted in roughly 1,000 customers having their cars repossessed.
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“The CFPB has caught Fifth Third Bank illegally loading up auto loan bills with excessive charges, with almost 1,000 families losing their cars to repossession,” said CFPB Director Rohit Chopra in a press release. “We are ordering the senior executives and board of directors at Fifth Third to clean up these broken business practices or else face further consequences.”
Some Fifth Third Bank customers even obtained essential auto insurance coverage within 30 days of a lapse, but were still charged for duplicative coverage because the previous policy wasn’t entirely canceled, according to the CFPB.
“These borrowers paid over $12.7 million in illegal, worthless fees,” the CFPB press release said. “While consumers received coverage with no value, Fifth Third Bank profited.”
In cases where the duplicative/unnecessary coverage was canceled, customers did not receive a refund as the bank instead applied it to their outstanding loan balances, according to the CFPB.
The CFPB also found that Fifth Third Bank opened fake bank accounts in the names of its customers without their consent due to a “cross-sell” strategy that increased the number of products and services it provided to customers.
Fifth Third Bank’s cross-sell strategy was first mentioned in a lawsuit that was filed against the bank in 2020 (which is what the fine from the CFPB settles). The lawsuit claims the bank rewarded employees who used the strategy to sell products.
“To further this cross-sell strategy, and to increase the number of products and services it provided to existing customers, Fifth Third conditioned employee-performance ratings and, in some instances, continued employment on whether managers and their subordinate employees met ambitious sales goals,” reads the lawsuit. “Fifth Third also used an incentive-compensation program that rewarded managers and their subordinate employees for selling new products and services to existing customers.”
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The lawsuit also alleges that the bank knew since 2008 that its employees were opening “unauthorized consumer-financial products and services” and did not properly address the situation to protect its customers.
“Fifth Third’s employees, without consumers’ knowledge or consent, opened deposit accounts in consumers’ names; transferred funds from consumers’ existing accounts to new, improperly opened accounts; issued credit cards; enrolled consumers in online banking services; and opened lines of credit on consumers’ accounts,” reads the lawsuit. “In short, Fifth Third focused on its own financial interests to the detriment of consumers.”
In addition to issuing Fifth Third Bank $20 million in penalties, the CFPB also proposed banning the bank from setting sales goals for its employees “that incentivize the opening of unauthorized accounts.”
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Fifth Third Bank has agreed to pay the fine and claims it is working with the Bureau to develop remediation plans for any customers affected by the issues.
"Today’s settlement concludes both the sales practices litigation with the CFPB, and its separate investigation into certain auto finance servicing activities related to a collateral protection insurance program that the Bank shut down in 2019 before the CFPB began its investigation," said Susan Zaunbrecher, chief legal officer of Fifth Third Bank, in a press release. "We have already taken significant action to address these legacy matters, including identifying issues and taking the initiative to set things right.
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