CFPB Lawsuit Charges Cincinnati Bank with Wells Fargo-esque Abuses

By:
Chris Gaetano
Published Date:
Mar 10, 2020
The Consumer Financial Protection Bureau (CFPB) has filed suit against Cincinnati-based Fifth Third Bank for signing up customers for financial products with neither their knowledge nor consent, in a set of circumstances extremely similar to what happened at the larger Wells Fargo bank.

In its complaint, the CFPB said that the bank, without permission, opened deposit and credit-card accounts in consumers’ names; transferred funds from consumers’ existing accounts to new, improperly opened accounts; enrolled consumers in unauthorized online-banking services; and activated unauthorized lines of credit on consumers’ accounts. What's more, the CFPB said that the bank had known about these practices since 2008, and that in fact bank leadership encouraged these practices by setting aggressive sales quotas as part of a cross-selling strategy. These incentives were both carrot and stick, as employees who met these goals received financial rewards, and those who failed to do so were given low ratings that could ultimately lead to termination. The CFPB said that these sales quotas were often designed in such a way that they were far beyond what employees could actually expect to sell. 

"Reasonable sales goals and performance incentives are not inherently harmful," said the CFPB's press release. "But when such programs are not carefully and properly implemented and monitored, as the Bureau alleges here, they may create incentives for employees to engage in misconduct in order to meet goals or earn additional compensation." 

Almost exactly the same thing occurred at the much larger Wells Fargo bank, which recently paid billions of dollars in settlements (though Wells Fargo also signed people up for auto loans without their permission). The sham accounts scandal involved the bank signing customers up for checking accounts, credit cards and debit cards with neither their knowledge nor consent. Some of these customers were then assessed fees and penalties, including overdraft fees from linked accounts, monthly service fees for failing to maintain a minimum balance, annual credit card fees and interest charges. Bank employees signed customers up using email addresses not belonging to consumers to enroll them in programs without their knowledge or consent. 

As with Fifth Third Bank, a major factor in the scandal was ruthless sales culture that put extreme pressure on employees to sell as many financial products as possible. The bank's own internal report on the sham accounts scandal said that employees were offered a wide variety of incentives linked to factors such as products sold per day, daily profit, packages sold per quarter, quarterly partner referrals or the number of loans made per quarter. As just one example, bankers who achieved nine daily qualifying sales would get $250 at the end of the quarter; those who made 11 would get $500; if they got 13, they’d get $800. These sorts of incentives, in turn, began influencing who got promoted: advancement in the bank was frequently based on sales performance, not management acumen or business knowledge, leading employees to believe, rightly, that the “route to success was selling more than your peers.”
 

The report noted, however, that employee participation in the accounts scandal was motivated more by fear than by financial compensation, as failure to meet these goals was a good way to get fired. A California lawsuit against the bank alleged that managers would “constantly hound, berate, demean and threaten employees” to meet sales quotas. Those who couldn’t would be put on probation, forced to work unpaid overtime or even fired. Not helping matters was that, for certain branches, it was literally impossible to meet the quotas, as there just weren’t enough customers in the general area to do so. 

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