Washington DC – The Consumer Financial Protection Bureau (CFPB) today took action against Fifth Third Bank for a series of illegal activities that will result in the bank paying a $20 million penalty and providing compensation to approximately 35,000 affected consumers, including approximately 1,000 who had their vehicles repossessed. Specifically, the CFPB is ordering Fifth Third Bank to pay a $5 million penalty for forcing auto insurance on insured borrowers. The CFPB also filed a proposed court order ordering Fifth Third Bank to pay a $15 million penalty for opening false accounts in customers’ names. The proposed court order prohibits Fifth Third Bank from setting sales targets for its employees that encourage the opening of fraudulent accounts.
“The CFPB found that Fifth Third illegally added excessive fees to auto loan invoices, causing nearly 1,000 families to lose their cars to repossession,” said CFPB Director Rohit Chopra. “We have ordered Fifth Third’s senior management and board of directors to correct these flawed business practices or face further penalties.”
Fifth Third Bancorp (NASDAQ: FITB) is a large bank holding company headquartered in Cincinnati, Ohio, with assets of $214 billion. Fifth Third Bank operates approximately 1,300 branches across 12 states, primarily in the Midwest and Southeast, and offers a range of financial services, including credit cards, mortgages, home equity lines of credit and auto loans.
Today’s CFPB order is the first action and addresses the CFPB’s findings that Fifth Third illegally caused foreclosures and charged illegal fees by forcing unnecessary and duplicative coverage policies on loan borrowers. Between July 2011 and December 2020, more than 50% of the policies were charged to borrowers who had always maintained their own coverage or obtained required coverage within 30 days after their prior policies expired. Specifically, Fifth Third’s conduct harmed borrowers by:
- Charging extra fees for unnecessary duplicate coverage: In over 37,000 cases, Fifth Third illegally charged fees that were completely worthless. In some cases, the insurance overlapped with insurance that borrowers already had on their vehicles. In some cases, consumers did not fully cancel the insurance they were forced to buy by purchasing the necessary insurance within 30 days of its expiration. These borrowers paid more than $12.7 million in illegal and worthless fees. Fifth Third made a profit while consumers received worthless insurance. When the unnecessary or duplicative insurance was canceled, borrowers were entitled to a refund for the illegally charged fees. However, instead of refunding the money directly to borrowers, Fifth Third applied the refunds to consumers’ unpaid loan balances. Fifth Third also made millions by reinsurance its insurance program and receiving fees that far exceeded claims losses under the program.
- Borrower penalties for foreclosure: Fifth Third Bank required borrowers to pay for insurance premiums they did not need, then faced late payments, additional fees and repossession if they failed to pay. Fifth Third Bank has repossessed vehicles when they fell behind on payments after the bank charged unnecessary and duplicative insurance premiums.
The second of two actions announced today resolves a lawsuit the CFPB filed against Fifth Third Bank in March 2020 for creating fake customer accounts and using “cross-selling” tactics to inflate the number of products and services it offered to existing customers.
Enforcement Actions
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions that violate the Consumer Financial Protection Act, including those who engage in unfair, deceptive, or abusive acts or practices. CFPB orders, if approved by a court, can require banks to:
- Provide relief to harmed consumersThe order requires Fifth Third Bank to pay restitution to approximately 35,000 affected consumers.
- Prevent sales targets that lead to fake accounts: The proposed order would prohibit banks from setting sales targets for employees that encourage them to open unauthorized accounts.
- Pay a $20 million fine: Fifth Third Bank must also pay a $5 million penalty for its illegal conduct, and a $15 million penalty for opening unauthorized accounts if the court passes the proposed order, both penalties to be deposited in the CFPB’s Victim Relief Fund.
In 2015, the CFPB brought two actions against the bank: one for discriminatory auto loan pricing, which was a joint action between the CFPB and the U.S. Department of Justice, and one for illegal credit card practices. For the discriminatory auto loan pricing action, Fifth Third Bank was ordered to pay $18 million to victimized black and Hispanic borrowers. For the illegal credit card practices, the bank was ordered to pay $3 million to victimized consumers and pay a $500,000 fine.
Read today’s order regarding illegal car lending practices.
Read today’s proposed court order regarding fake accounts.
Consumers can file complaints about financial products or services by visiting the CFPB’s website or calling (855) 411-CFPB (2372).
Employees who believe their company is violating federal consumer financial protection laws should submit any information they know to whistleblower@cfpb.gov. More information on how to report possible industry misconduct can be found on the CFPB’s website.
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer financial laws and ensures that the marketplace for consumer financial products is fair, transparent, and competitive. For more information, please visit: Consumer finance.
