Wells Fargo created fake credit accounts: $185M fine

Wells Fargo, whose biggest shareholder is Berkshire Hathaway, is now facing a $185 million fine for fraudulent activities of its employees. Wells Fargo created fake credit accounts and ill-gained a significant amount of money. What is in the future for the bank?

September 9, AtoZForex – Wells Fargo is a well- known American international banking and financial services holding company. Federal regulators state that Wells Fargo employees have secretly created million of the false bank and credit accounts.

What happened?

Let’s dig deeper. Wells Fargo employees are reported to create phony accounts for their clients since 2011. Moreover, Wells Fargo customers were not even aware of it. The unauthorized accounts ill-gained a number of unjustified fees and provided Wells Fargo employees with increased revenues. The director of the Consumer Financial Protection Bureau (CFPB), Richard Cordray, commented on this matter:

“Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses. Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed. Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.”

As reported by media, Wells Fargo agreed that it had fired 5,300 workers in the period of the last five years due to the suspicious behavior. This time, employees have designed false PIN numbers and phony email addresses to sign up the customers for online banking services.

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How did the employees perform the fraud?

A research has been conducted on this case and the data shows that Wells Fargo employees have created over 1.5 million deposit unauthorized accounts. The scheme used by Wells Fargo employees included the shift of the funds from clients’ existing accounts to freshly-opened ones without their knowledge, as it is reported by federal regulators. CFPB also states that this practice is known as “widespread.” Clients were charged for lacking funds or overdraft fees, as there weren’t enough funds in their real accounts.

According to the official press release by CFPB, the following breaches took the place in this case:

-Opening deposit accounts and transferring funds without authorization, sometimes resulting in insufficient funds fees.

-Applying for credit-card accounts without consumers’ knowledge or consent, leading to annual fees, as well as associated finance or interest charges and other late fees for some consumers.

-Issuing and activating debit cards, going so far as to create PINs, without consent.

What punishment awaits Wells Fargo staff?

According to the Dodd-Frank Wall Street Reform and Consumer Protection Act, CFPB requires Wells Fargo to pay full restitutions to clients, ensure proper sales practices, and pay a $100 million fine. This monetary penalty is the largest in the CFPB history.

Wells Fargo created fake credit accounts, bank authorities have stated:

“We regret and take responsibility for any instances where customers may have received a product that they did not request.”

Among other penalties, Wells Fargo is obliged to pay $35 million to the Office of the Comptroller of the Currency and $50 million to City and County of Los Angeles.

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