In a recent development, the Consumer Financial Protection Bureau (CFPB) announced a hefty $20 million fine for Fifth Third Bank, accusing the bank of compelling auto loan customers to purchase unnecessary car insurance policies. The bank allegedly resorted to repossession of vehicles when customers defaulted, resulting in nearly 1,000 families losing their cars. CFPB Director Rohit Chopra condemned Fifth Third’s unethical practices and issued a stern warning to the bank’s senior executives and board of directors to rectify these malpractices or face further consequences.
Moreover, Fifth Third Bank was also found guilty of unauthorized bank accounts being opened for thousands of customers without their knowledge or consent. This conduct was attributed to a sales initiative from top management that tied employee performance reviews to meeting sales goals. As part of the CFPB’s penalty, Fifth Third must compensate around 35,000 affected customers and is prohibited from setting sales goals that encourage opening fake accounts. The bank is required to pay $15 million for the unauthorized accounts and an additional $5 million for forcing customers to purchase duplicate auto insurance coverage, according to CFPB officials.
Fifth Third admitted to the unauthorized bank account practice affecting a limited number of accounts between 2010 and 2016. The bank discontinued its auto insurance scheme voluntarily in January 2019, prior to the CFPB’s investigation. Susan Zaunbrecher, Fifth Third’s chief legal officer, emphasized the bank’s ongoing efforts to rectify these legacy issues and reiterated their commitment to customer-centric practices. Analysts predict that paying the $20 million fine will ultimately save Fifth Third money in the long run and should lead to reduced litigation costs over time.