The Consumer Financial Protection Bureau fined Fifth Third Bank $20 million Tuesday for forcing auto loan customers to buy unnecessary auto insurance policies and, in some cases, repossessing their cars when they defaulted on payments.
“The Consumer Financial Protection Bureau caught Fifth Third Bank illegally charging excessive fees on auto loan bills, resulting in nearly 1,000 families losing their cars to repossession,” CFPB Director Rohit Chopra said in a statement. statement Tuesday. “We are ordering Fifth Third’s senior executives and board to clean up these corrupt business practices or face further consequences.”
The Consumer Financial Protection Bureau also alleged that employees at the Ohio-based bank illegally opened fake bank accounts for thousands of customers without their knowledge or consent under a “cross-selling” sales goal initiative from senior management. CFPB officials said Fifth Third Bank managers and branch employees had performance evaluations and general hiring tied to meeting sales goals of offering more products to existing customers. The fine settles a lawsuit in March 2020 lawsuit The Consumer Financial Protection Bureau has filed a lawsuit against Fifth Third Bank over unauthorized bank accounts.
As part of the CFPB penalty, Fifth Third must reimburse 35,000 customers who opened accounts in their names or were forced to buy auto insurance. The bank is also prohibited from setting sales targets that would encourage employees to open bogus accounts. CFPB officials said Fifth Third must pay a $15 million fine for opening the bogus accounts and another $5 million for forcing customers who already had auto insurance to get duplicate coverage.
Cars that were recovered after not paying false fees
Fifth Third has been in the auto insurance business for years, Consumer Financial Protection Bureau officials said, adding that the bank charged customers for duplicate coverage for cars that were already insured by another company. Some Fifth Third customers whose previous coverage had expired but were able to get insurance within 30 days of the coverage expiring were also charged for the duplicate coverage, according to the CFPB.
“These borrowers paid more than $12.7 million in illegal, worthless fees,” the agency said in a news release. “While consumers received worthless coverage, Fifth Third Bank benefited.”
Fifth Third said in a statement Tuesday that its practices involving unauthorized bank accounts occurred on “a limited number of accounts” between 2010 and 2016. The bank said it voluntarily stopped its auto insurance business in January 2019, before the Consumer Financial Protection Bureau began investigating the company.
“We have already taken significant steps to address these longstanding issues, including identifying the issues and taking the initiative to correct them,” Susan Sonnbrecher, Fifth Third’s chief legal officer, said in a statement. statement“We always put our customers at the center of everything we do.”
The fifth and third that was Financial penalty The bank had $62 billion in assets under management as of April, after spending $18 million in 2015 over discriminatory auto-loan practices against black and Latino customers. The bank has 1,087 branches in 12 states in the South and Midwest.
Wall Street analysts said paying the $20 million fine would actually save Fifth Third money.
“We believe these actions put an end to these issues and should also lead to lower litigation costs over time,” Jefferies analysts said in a note Tuesday. “The auto repossession provision is new to the public, but our understanding is that it relates to a very small percentage of auto loans. The small $5 million fine indicates the relative seriousness of this case, in our view.”
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