The feds use their new muscle: Consumer protection agency fines Wells Fargo for massive fraud

[applegrove]

by Simon Maloy at Salon

http://www.salon.com/2016/09/09/the-feds-use-their-new-muscle-consumer-protection-agency-fines-wells-fargo-for-massive-fraud/

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For those who can drag their eyes away from the ongoing 2016 election shambles, the big news coming out of Washington this week was the fine the Consumer Financial Protection Bureau slapped on Wells Fargo for fraudulent banking practices. Per CFPB’s press release, Wells Fargo employees “opened roughly 1.5 million deposit accounts that may not have been authorized by consumers,” and “applied for roughly 565,000 credit card accounts that may not have been authorized by consumers.” This was done over a period of several years, and the infractions were committed as part of aggressive “compensation incentive programs for its employees that encouraged them to sign up existing clients for deposit accounts.”

Wells Fargo will have a to pay a $100 million fine levied by CFPB, as well as $55 million to the city of Los Angeles, and another $35 million to the Office of the Comptroller of the Currency. The bank also has to pay $5 million in restitution to customers who were affected by the widespread fraud. It’s the largest financial penalty CFPB has imposed to date, and it shows both the value of the consumer protection agency, and how the CFPB is trying to employ different means of leverage to change the culture of banking.

Consumer advocacy groups are thrilled with the action and see it as something that only could have come about with a federal consumer watchdog group actively monitoring the banks. “The scope of the misconduct at Wells Fargo toward consumers is truly astounding, and the compensation and firings occurring there in response are more than appropriate,” Public Citizen’s Lisa Gilbert said in a statement to Salon. “This is yet another instance where we can be thankful for our new consumer watchdog, the CFPB.” Much of the media coverage surrounding the Wells Fargo fine centers on both the historic nature of the penalty and the fact that over 5,000 Wells Fargo employees have been fired in connection with the scandal. When we talk about this in terms of accountability, though, we have to throw in some important context.

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CFPB’s order imposing the fine also requires Wells Fargo to hire an agency-approved independent consultant to conduct an overview of its sales practices and determine whether they’re in compliance with federal consumer protection laws. And it mandates that the Wells Fargo board of directors take an active role in enacting whatever changes are recommended by the independent review, monitoring their implementation, and assisting CFPB in providing oversight. The hope is that the combination of bad press, the threat of larger financial penalties in the future, and whip-cracking on company brass will help remake the banking culture. “I absolutely think that this is a big thing that’s going to make a difference,” Mierzwinski told me, “not just at Wells Fargo, but across the industry.”


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[Shandris]

1. So they made 5.6 billion just last quarter, and are getting fined two bucks and change per person.

Yeah, what a stunning 'accomplishment'. No jail, no ACTUAL restitution (although the governments got them some money, nice transfer of cash from taxpayer to government by proxy), no list of the names of those responsible, no restitution from the actual employees who did the theft for the 'compensation', nothing. A fine that isn't even enough to get a line-item entry in their budget and 'advocates' 'celebrating'.

Oh, but they'll have to hire someone to 'inspect' and make sure they're on the up and up! Because, you know, that 'oversight' worked so well last time. Way to 'crack the whip'. I'm sure they're terrified.

Ah well. If anyone actually cared, this would have ended in a week. It didn't, so they don't.

[jberryhill]

3. What do you mean "no ACTUAL restitution"

I do not know all of the details of the story, but I gather these people opened accounts in people's names which went unused.

What was the extent of harm? The story mentions "The bank also has to pay $5 million in restitution to customers". Was the extent of harm larger than that?

[Sherman A1]

4. Again we see that

functionaries get the axe and take the blame and those that were in positions of authority to induce these actions or to stop them from occurring get not even a slap on the wrist. I don't see the upside to this settlement.

[malaise]

2. Saw this on ABC last night

I wonder if they all haven't been doing this.