Wells Fargo to Pay $185 Million Fine Over Account Openings

Regulators say ‘widespread illegal practice’ around account openings

By Emily Glazer
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Tessa Stevens says she got products she didn’t want when she went to Wells Fargo for a $50,000 line of credit to expand her preschool in Portland, Ore. . Photo: Toni Greaves for The Wall Street Journal


Wells Fargo WFC 0.26 % & Co., the largest U.S. bank by market value, must pay $185 million related to a regulatory enforcement action over “widespread illegal practice” around account openings, sales targets and compensation incentives, according to regulators and prosecutors.

The Office of the Comptroller of the Currency, Consumer Financial Protection Bureau and Los Angeles City Attorney announced settlements and resulting consent order with the bank on Thursday.

Wells Fargo must pay another $5 million in customer remediation and hire an independent consultant for a review, according to the bank and regulators. A Wells Fargo analysis found thousands of employees “illegally” signed up customers for more than two million deposit and credit-card accounts that may have not had their knowledge or consent, according to the releases.

”Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed,” said CFPB Director Richard Cordray.

Wells Fargo said in a release that the agreements were reached “consistent with our commitment to customers and in the interest of putting this matter behind us.” The bank added: “We regret and take responsibility for any instances where customers may have received a product that they did not request.”

Regulators and prosecutors have been investigating whether Wells Fargo pushed employees too hard to meet sales goals while failing to do enough to prevent questionable behavior, The Wall Street Journal has previously reported. In May 2015, the Los Angeles City Attorney filed suit, alleging the bank pressured its employees to commit fraudulent acts, including opening accounts for people that don’t exist.

This happened at bank branches across the country with thousands of employees responsible, the regulators said. The bank fired about 5,300 employees during the CFPB’s examination.

In the bank’s own analysis, employees opened roughly 1.5 million deposit accounts that may not have been authorized by customers, the CFPB said. Employees transferred funds from authorized accounts to temporarily fund the ones they hadn’t been given permission to open; this helped employees to meet sales goals and possibly gain more compensation. Consumers were sometimes hurt because the bank charged them for insufficient funds or overdraft fees since money wasn’t in their original, authorized accounts.

And the bank found in its analysis that about 565,000 credit cards may not have been authorized by consumers, incurring annual fees and other charges.


Wells Fargo employees also requested and issued debit cards without customers’ knowledge or consent, even creating PINs without telling customers. They also created fake email addresses to enroll consumers in online-banking services without their knowledge or consent.

The settlement between the L.A. City Attorney and the bank also establishes a complaint and mediation system for California consumers harmed by the bank’s alleged practices. “Wells Fargo must alert all of its California customers who have consumer or small business checking or savings accounts, credit cards or unsecured lines of credit, that they should consider visiting their local bank or call Wells Fargo to review their accounts, close accounts or discontinue services they do not recognize or want, and resolve remaining problems,” according to the release. Every six months for the next two years, Wells Fargo must provide to the City Attorney audit reports assessing the bank’s compliance with the agreement.

“It is outrageous for a bank to use a customer’s private information without permission to open an unwanted account,” L.A. City Attorney Michael Feuer said on a call with media. “Consumers must be able to trust their banks.”

Wells Fargo, like other banks, has pushed cross-selling of multiple products to its customers to bolster sales and profitability at a time when both have been under pressure from a sluggish economy and superlow interest rates.

Many banks encourage their customers to buy more than one financial product—cross selling—but Wells Fargo has been more upfront about how much it does. Wells Fargo in quarterly reports publishes by division how many products it sells to its customers, on average.

The bank reported in the second quarter that retail customers maintained an average of 6.27 products per household. That was down from 6.32 in the year-earlier period in part because of recent changes in which products count toward the metric.

Wells Fargo spokeswoman Mary Eshet said the bank had a third-party consulting firm review consumer and small-business retail-banking deposit accounts and unsecured credit cards opened from 2011 through 2015. It then refunded any fees associated with products customers may not have requested.

Ms. Eshet said the accounts refunded represented a fraction of 1% of accounts reviewed, averaged about $25 per account and totaled about $2.6 million.

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