Fifth Third Bank Slapped with $20 Million Fine for Deceptive Practices to 35,000 Consumers

Imagine waking up one day to find your car repossessed, only to discover that your bank had illegally forced unnecessary insurance on you. For nearly 1,000 Fifth Third Bank customers, this nightmare became a reality.

The Consumer Financial Protection Bureau (CFPB) has caught the bank engaging in illegal activities, resulting in a whopping $20 million fine and restitution for approximately 35,000 harmed consumers ¹.

Fake Accounts & Forced Insurance

The CFPB’s investigation revealed that Fifth Third Bank had been opening fake accounts in customers’ names and forcing unnecessary auto insurance on borrowers who already had coverage. These practices, which occurred between 2011 and 2020, led to millions of dollars in illegal fees and wrongful vehicle repossessions.

From 2010 to 2016, more than 26,000 deposit accounts were opened from existing accounts containing $100 or less, with about 124,000 of those subsequently having a zero balance within 90 days. Similarly, over 218,000 credit cards were issued without ever being activated or used.

The CFPB alleged that in many cases, the accounts were opened using Fifth Third employee email addresses, even though the customers were not bank employees.

Additionally, from July 2011 to December 2020, Fifth Third forced auto loan borrowers to accept unnecessary or duplicative insurance coverage in more than 37,000 instances, charging over $12.7 million in “illegal, worthless fees.” Borrowers who reinstated their own insurance within 30 days were still billed for duplicate coverage. This resulted in nearly 1,000 wrongful vehicle repossessions when customers faced delinquency due to the extra charges.

Director Rohit Chopra of the CFPB did not mince words, stating, “The CFPB has caught Fifth Third Bank illegally loading up auto loan bills with excessive charges, with almost 1,000 families losing their cars to repossession.”^(ref)

A History of Misconduct

This is not the first time Fifth Third Bank has faced regulatory action. In 2015, the bank was penalized $18 million for discriminatory auto loan pricing against Black and Hispanic borrowers and another $3.5 million for illegal credit card practices.^(ref) The recent findings suggest a pattern of misconduct that has persisted for years.

According to violation tracking data, Fifth Third and its subsidiaries have paid over $112 million in penalties since 2000 for various financial offenses, including toxic securities abuses, privacy violations, and consumer protection violations. This history paints a troubling picture of the bank’s business practices and treatment of customers.

Fines, Restitution & Calls for Change

As part of the enforcement action, Fifth Third Bank must pay a $5 million penalty for the illegal auto insurance practices and, pending court approval, an additional $15 million for the unauthorized account openings. The bank is also required to compensate the affected customers and ban sales goals that incentivize fraudulent behavior.

The CFPB’s message is clear: financial institutions must prioritize ethical conduct and consumer protection. Fifth Third Bank’s senior executives and board members are now tasked with addressing these systemic issues or facing further consequences.

Susan Zaunbrecher, Fifth Third’s chief legal officer, stated that the bank has already taken significant action to rectify these historical matters, including proactively identifying issues and setting things right.^(ref) However, the severity of the penalties and the scale of the misconduct suggest that much more work needs to be done to rebuild trust with customers and regulators.

Rebuilding Trust

For Fifth Third Bank, the road ahead involves not only rectifying its practices but also regaining the trust of its customers and the public. As consumers, we must remain vigilant and hold financial institutions accountable for their actions. The CFPB’s enforcement serves as a reminder that deceptive practices will not be tolerated in the banking industry.

Affected Fifth Third customers do not need to take any action to receive restitution, as the bank will be contacting them directly. However, the process may take months, as Fifth Third must submit a comprehensive plan to the CFPB detailing how it will handle the paybacks and await the agency’s approval.

As the bank works to address these issues and compensate harmed customers, it is crucial that it also takes steps to prevent similar misconduct in the future. This includes implementing robust oversight, training, and compliance measures to ensure that all employees adhere to ethical standards and prioritize the well-being of customers.

Source:

1. Consumer Financial Protection Bureau