Wells Fargo to pay $185M for illegal banking practices

For its alleged abuses of costumers' trust and violations of consumer protection laws, Wells Fargo was hit with $185 million in fines, including a $100 million penalty from the CFPB, a record for the agency created after the financial crisis. Wells Fargo, like other banks, has pushed the cross-selling of multiple products to its customers.

California and federal regulators today fined Wells Fargo Bank (WFC), one of the US largest banks, $185 million in civil penalties to resolve claims that bank employees secretly opened millions of unauthorized accounts for their customers in order to meet aggressive sales goals. Employees also submitted applications for 565,443 credit-card accounts without customers' knowledge or consent.

Under terms of the settlement, Wells Fargo must pay a total of $50 million in penalties to the city and county of Los Angeles.

The San Francisco-based bank will pay US$50 million to the City of Los Angeles, which had filed suit a year ago, accusing the bank of pressuring employees into fraudulent behaviour, such as opening fictitious accounts. Wells Fargo will set aside an additional $5 million to refund customers. Consumers are not required to take any action to get refunds to which they are entitled. In the wake of the scandal, the bank which is one of the biggest in the U.S., has fired 5,300 employees. Until now, the largest civil penalty from the bureau was a $40 million fine imposed on debt- relief company Morgan Drexen Inc.in March for allegedly charging illegal fees.

The also created phony email addresses not belonging to consumers to enroll them in online-banking services without their knowledge or consent.

Wells Fargo's aggressive sales tactics were first disclosed by The Los Angeles Times in 2013.

The deception came to the notice of some customers when they were charged unexpected fees, but the sham accounts mostly went unnoticed, as employees would routinely close them shortly after opening them.

So far, Wells Fargo has fired 5,300 employees in connection with these types of scams.

In addition to the fines, Wells Fargo has been told to refund all affected customers, something which is likely to cost at least $2.5 million.

"This is a major victory for consumers", said Los Angeles City Attorney Mike Feuer, whose office sued Wells Fargo in 2015 after a Los Angeles Times investigation into the fake accounts.

The bank has been fined $100 million, the largest fine ever handed down by the CFPB.

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