Janice R. Andrews
Fifth Third Bank stated on Tuesday that it has agreed to pay $20 million in fines as a result of a Consumer Financial Protection Bureau (CFPB) probe, marking the start of a major regulatory crackdown. The fines cover a 2020 lawsuit about the establishment of fictitious client accounts as well as the bank’s contentious auto insurance practices.
The CFPB’s conclusions
The Fifth Third Bank was found to have participated in unlawful activities, including billing consumers for needless vehicle insurance policies, according to the CFPB’s inquiry. More than 1,000 cars were repossessed as a result of these activities, which had a detrimental effect on more than 35,000 clients. Fifth Third Bank allegedly threatened borrowers with default, more fees, and repossessions if they did not pay for redundant coverage, according to the CFPB.
The CFPB said, “Fifth Third Bank forced borrowers to pay for coverage they did not need or risk delinquency, further fees, and repossessions.” “When the bank charged unnecessary and duplicate coverage, it resulted in the delinquency and the bank’s repossession of the vehicles.”
Penalties and Changes
The CFPB ordered Fifth Third Bank to give $5 million in compensation to the impacted consumers as a result of these findings. The bank must also restructure its operations in order to stop wrongdoing in the future. Director of the CFPB Rohit Chopra stressed the agency’s position and threatened additional repercussions for noncompliance.
In addition, Fifth Third Bank was ordered by a proposed court order filed by the CFPB to pay an extra $15 million in fines for encouraging staff members to open fraudulent customer accounts. Additionally, the bank is not allowed to set employee sales targets that promote the opening of bogus accounts.
Fifth Third Bank’s Reaction
“Today’s settlement concludes both the sales practices litigation with the CFPB and its separate investigation into certain auto finance servicing activities related to a collateral protection insurance program that the bank shut down in 2019 before the CFPB began its investigation,” said Susan Zaunbrecher, Chief Legal Officer of Fifth Third, in acknowledgment of the settlement. To address these legacy challenges, we have already made great strides in identifying problems and initiating corrective action. Our customers are always at the center of all we do.
A Background of Examining
Fifth Third Bank has previously been subject to fines from the CFPB. Due to discriminatory vehicle loan pricing, the bank was ordered in 2015 to pay $18 million to Black and Hispanic consumers. It also settled a $500,000 fine and $3 million in compensation for using improper credit card methods.
Proceeding Forward
The Fifth Third Bank case highlights the significance of ethical banking practices and strong consumer protection measures as the bank attempts to make up for its previous transgressions and adhere to regulatory requirements. The CFPB’s victim relief fund will receive the penalties, with the goal of making some sort of compensation to the customers who were wronged by these actions.
This settlement is an important reminder to financial institutions to put fairness and transparency first and make sure that their customers are treated with dignity and honesty.
