Wells Fargo fined $185M for employee bonus scam

Wells Fargo Bank was hit with $185 million in fines from federal regulators on Thursday over a widespread scam by employees who created millions of fake accounts with real customers' money to earn sales bonuses. File Photo by Vividrange/Shutterstock

WASHINGTON, Sept. 8 (UPI) — Federal regulators on Thursday fined Wells Fargo┬áBank nearly $200 million for a widespread scam run by some employees to open millions of bogus accounts to meet quotas and generate sales bonuses, officials said.

The federal Consumer Financial Protection Bureau announced the penalties against the bank after an investigation uncovered rampant illegal activity by thousands of employees.

According to regulators, employees at Wells Fargo opened more than 2 million fake deposit accounts in real customers’ names and even transferred money in and out of them, without authorization, from those unsuspecting customers.

“This widespread practice gave the employees credit for opening the new accounts, allowing them to earn additional compensation and to meet the bank’s sales goals,” the CFPB said.

Wells Fargo then charged some of those customers for insufficient funds or overdraft fees because the money had been removed from the original account, regulators said.

The employees also applied for credit cards on behalf of more than a half-million existing customers without their knowledge or consent, the CFPB said, enrolled them in banking services they did not ask for, and activated debit cards — in some cases “going so far as to create [new] PINs without telling consumers.”

In its largest fine ever imposed on a bank, the CFPB ordered Wells Fargo to pay $100 million for the scam. The Office of the Comptroller of the Currency, another federal regulator, issued a fine of $35 million, and the City and County of Los Angeles will receive $50 million from the bank.

Total penalty: $185 million.

The enforcement action is retroactive to the start of 2011. Wells Fargo must also hire an independent consultant to conduct a thorough review of its procedures, which may include employee retraining and reform of the bank’s performance-based policies.

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

“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.”

Investigators said the scammers’ motive in creating the fake accounts was to hit sales quotas and, in turn, earn performance bonuses. Such activity, though, violates federal law.

In addition to the penalties, Wells Fargo has also agreed to pay full restitution, totaling about $2.5 million, to all its customers whose identities and money were involved in the scam.

The practices uncovered at the South Dakota-based bank violated multiple provisions of the Dodd-Frank Wall Street Reform Act of 2010, regulators said.

“Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us,” the bank said in a statement Thursday. “Wells Fargo is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request.”

Wells Fargo also addressed the penalty in an email to employees Thursday.

“At Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action. Today’s agreements are consistent with these beliefs,” CEO John Stumpf said in the email. “Every Wells Fargo team member is expected to adhere to the highest possible standards of ethics and business conduct.”

CFPB Enforcement Action (Wells Fargo)

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