LOS ANGELES -- City and federal officials have accepted a $185 million settlement with Wells Fargo over allegations that the bank's employees, driven by strict sales quotas, regularly opened new accounts for customers without their knowledge.
The settlement, announced Thursday morning, calls for the San Francisco banking giant to pay $100 million in penalties to the Consumer Financial Protection Bureau -- the largest fine the federal agency has ever imposed -- and $35 million to the Office of the Comptroller of the Currency, another federal regulator.
It also will pay $50 million in penalties to local officials and to compensate account holders for fees related to bogus accounts. The bank will not admit any wrongdoing.
The questionable practices were uncovered by a 2013 Los Angeles Times investigation that found Wells Fargo pressured its employees to open more accounts and that some employees even resorted to opening fake ones to meet sales goals.
Last year, Los Angeles City Attorney Mike Feuer filed a lawsuit that alleged Wells Fargo "victimized their customers by using pernicious and often illegal sales tactics" including unrealistic quotas and policies that have "driven bankers to engage in fraudulent behavior."
The federal agencies conducted their own investigations into the bank's sales tactics.
"Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses," said Richard Cordray, director of the Consumer Financial Protection Bureau, in a statement Thursday. "Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed."
In a statement Thursday, Feuer called the settlement a victory for consumers.
"We're holding Wells Fargo accountable and assuring the violations we've alleged never happen in the future," he said. "Consumers must be able to trust their banks."
The bank has consistently said such practices are not widespread and that workers who cheat to meet sales goals are disciplined or fired. In a statement Thursday, Wells Fargo confirmed the settlements and said it has set aside $5 million to cover refunds to customers.
"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," the bank said in its statement.
The Times' 2013 story, based on court records and interviews with dozens of former and current Wells Fargo employees, reported that workers opened duplicate accounts, ordered credit cards for customers who did not ask for them and even forged customers' signatures.
In many cases, customers say they've had to pay fees related to accounts they never opened.
In a more extreme case, Mexican pop star Ana Barbara this summer sued Wells Fargo, saying an employee opened up accounts without her knowledge then spent more than $400,000 in her name.
Wells Fargo employees have sued the bank alleging they were forced to work unpaid overtime as they tried to meet goals, while bank customers have sued alleging that fake accounts were opened in their names.
But the customers have so far been unsuccessful in their lawsuits. At Wells Fargo, as at many other banks, when customers sign up for accounts, they agree that any dispute with the bank will be handled in private arbitration rather than in court.
Judges have ruled that those arbitration agreements hold up even in cases in which customers are suing over accounts they never authorized.
Along with reimbursing customers and paying $25 million to the city of Los Angeles and another $25 million to the county, the bank will send notices to customers asking them to stop by a branch so that employees can "help you close any accounts or discontinue services you do not recognize or want," according to the settlement agreement with Feuer's office.
Already, Wells Fargo officials said the bank has hired an outside firm that has reviewed customer accounts looking for bogus accounts and that the bank has paid $2.6 million in refunds so far. The bank said the outside review was finalized before the settlements.
The bank said it has also disciplined and fired managers and employees who "acted counter to our values," and has worked to improve training and monitoring programs.
Business on 09/09/2016