The CFPB levies a $37.5 million fine for unlawful consumer credit card practices

August 16, 2022

U.S. Bank learns a hard lesson: The Consumer Financial Protection Bureau (CFPB) levies a $37.5 million fine for unlawful consumer credit card practices

In 2016, the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo $100 million for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts.

6 years later, U.S. Bank has learned the same lesson: Don’t expect to get away with unlawful consumer credit practices.

On July 28, the CFPB assessed a $37.5 million fine against the bank for exploiting customers’ personal data to open sham accounts. U.S. Bank unlawfully accessed customers’ credit reports to open checking, savings, credit cards, and lines of credit without customer consent. Additionally, U.S. Bank must now develop a plan to make impacted customers whole again for these unlawfully charged fees and costs, plus interest.

The root cause in both cases was the same: Employees who were “incentivized” (pressured) with sales goals. Management implemented sales campaigns with an incentive compensation program that financially rewarded employees. U.S. Bank was aware that sales pressure was leading employees to open accounts without authorization, and the bank had inadequate procedures to prev

ent and detect these accounts. Beginning in 2016, the bank enhanced its processes for account opening, and the non-authorized accounts began trending downward. As a result, U.S. Bank was charged with exploiting personal data without authorization; opening accounts without consumer permission - and failing to provide legally required consumer disclosures over a period of 10 years.

U.S. Bank relied on consumers or employees to identify improper activity. Customer complaints were only escalated to the branch-level, leaving much of this activity undetected by management. As part of the CFPB consent order, they must develop a compliance plan that includes policies and procedures to identify, manage, mitigate, and report risks and misconduct associated with sales related behaviors. The bank must also describe how they will prevent and detect sales misconduct and oversee the appropriateness, effectiveness, and timeliness of actions taken in response to sales misconduct.

Ensuring that your institution avoids this fate starts with a few key questions:

  • Have you looked at your incentive compensation programs?
  • How robust is your complaint management program?
  • Does your institution analyze complaints for trends?
  • What are your oversight and upward reporting practices?

Employees can report what they believe to be violations to
Consumers can submit complaints by visiting the CFPB’s website.

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Article contributed by Evelyn Dehmey.