Consumer Finance Insights
September 13, 2016

CFPB Assesses Largest Fine in Agency’s History Against National Bank for Opening Accounts Without Consumers’ Consent

On September 8, 2016, the Consumer Financial Protection Bureau (CFPB) announced that, pursuant to a Consent Order, a national bank agreed to make full restitution to consumers and pay the CFPB a $100 million fine because many of its employees allegedly engaged in an illegal practice of opening unauthorized deposit and credit card accounts on behalf of consumers in order to obtain financial compensation for meeting sales targets. The fine is the largest in the CFPB’s history. The bank will also pay an additional $35 million fine to the Office of the Comptroller of the Currency (OCC) and $50 million to the City and County of Los Angeles, for a total of $185 million in fines.

According to the Consent Order, many employees engaged in “simulated funding,” whereby they would open deposit accounts “without consumers’ knowledge or consent and then transfer[] funds from the consumers’ authorized accounts to temporarily fund the unauthorized accounts in a manner sufficient for the employees to obtain credit under the incentive-compensation program.”  The bank terminated roughly 5,300 employees for engaging in these improper sales practices. These employees also “submitted applications for and obtained credit cards for consumers” and “enrolled consumers in online-banking services without their knowledge or consent.” According to the bank’s analysis, as many as 1.5 million deposit accounts and 565,000 credit cards may have been opened without authorization.  Some of these deposit accounts and credit cards incurred fees, which the bank is in the process of refunding.  In addition to paying monetary relief, the bank also agreed to engage an independent consultant to conduct an independent review of the bank’s sales practices. The bank agreed to the stipulated consent order without admitting or denying the findings of fact and conclusions of law, except as necessary to establish the CFPB’s jurisdiction.  A separate OCC Consent Order additionally “requires the bank to take corrective action to establish an enterprise-wide sales practices risk management and oversight program to detect and prevent unsafe or unsound sales practices.”  

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