Banking Regulation

Fifth Third Bank Fined $20 Million for Unlawful Practices

Main image to the post Fifth Third Bank Fined $20 Million for Unlawful Practices

The Consumer Financial Protection Bureau took action against Fifth Third Bank, penalizing the institution with a $20 million fine for deceptive practices related to auto loans. Among the accusations were the bank's misconduct in adding excessive charges to auto loan bills, resulting in nearly 1,000 families losing their vehicles through repossession. This punitive measure was rooted in an initiative that saw employees at the Ohio-based bank illicitly opening fraudulent bank accounts for approximately 35,000 customers, all in pursuit of meeting sales targets set by top management.

According to the CFPB investigation, Fifth Third Bank's management tied employee performance evaluations and job security to the achievement of these sales goals, pressuring staff to push additional banking products onto existing customers. The regulatory authorities identified these practices as part of a larger issue that included unauthorized account openings, leading to the lawsuit initially filed in March 2020. The penalty imposed on Fifth Third Bank comprises compensating the affected 35,000 customers for the unauthorized accounts and prohibiting the establishment of sales quotas that incentivize employees to create fake accounts.

The fine also includes a $15 million sum for the unauthorized bank accounts and an additional $5 million for compelling customers who already had auto insurance to purchase redundant coverage. The CFPB disclosed that Fifth Third Bank had been engaging in these deceptive auto insurance practices over an extended period, accumulating millions of dollars in illicit fees from customers who were essentially provided with valueless coverage. Despite the bank claiming that the unauthorized accounts were limited in occurrence and discontinuing the auto insurance scheme voluntarily in 2019, the CFPB's scrutiny highlighted the gravity of the situation by uncovering substantial financial harm caused to consumers.

Fifth Third Bank, which was previously fined in 2015 for discriminatory practices against Black and Hispanic auto loan customers, maintains a significant presence with $62 billion in assets and over a thousand branches across the South and Midwest. The institution's response to the recent penalty emphasized its commitment to rectifying past discrepancies and prioritizing customer welfare moving forward. In light of the developments, financial analysts on Wall Street indicated that while the $20 million fine may seem substantial, it could prove beneficial for Fifth Third Bank in terms of mitigating future litigations and costs associated with these unlawful practices.

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May 21, 2023 | 05:09