The Consumer Financial Protection Bureau (CFPB) recently took two actions against Cleveland-headquartered Fifth Third Bank to settle both the bureau’s investigation into the bank’s auto insurance practices and a 2020 lawsuit it filed against the bank for creating fake customer accounts.
“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,” said CFPB Director Rohit Chopra. “We are ordering the senior executives and board of directors at Fifth Third to clean up these broken business practices or else face further consequences.”
Fifth Third Bank has agreed to pay a total of $20 million in penalties in addition to paying redress to some 35,000 harmed consumers.
Specifically, the CFPB on July 9 ordered Fifth Third Bank to pay a $5 million penalty for forcing vehicle insurance onto borrowers who had coverage and filed a proposed court order that would require Fifth Third Bank to pay a $15 million penalty for opening fake accounts in the names of its customers.
The proposed court order bans Fifth Third Bank from setting employee sales goals that incentivize fraudulently opening accounts, according to the CFPB.
Specifically, the bureau found that Fifth Third Bank’s conduct harmed borrowers by charging extra fees for unnecessary and duplicative coverage. In more than 37,000 instances, Fifth Third Bank illegally charged fees to borrowers who paid over $12.7 million in illegal, worthless fees, according to the bureau.
Fifth Third Bank also demanded borrowers pay for coverage they did not need or else face delinquency, additional fees, repossessions, and repossessed vehicles even when a customer’s payment delinquency was caused by the bank charging unnecessary and duplicative coverage, the CFPB said.
The second of the two actions announced on July 9 resolves the CFPB’s March 2020 lawsuit against Fifth Third Bank for creating fake customer accounts and using a “cross-sell” strategy to increase the number of products and services it provided to existing customers.
The publicly traded Fifth Third Bancorp, a large bank holding company with $214 billion in assets, operates approximately 1,300 branches in 12 states, primarily in the Midwest and Southeast. The company offers financial services, including credit cards, mortgages, home equity lines of credit, and auto loans.
The bank has come up against the CFPB before. In 2015, the CFPB took two actions against it: one for discriminatory auto loan pricing, which was a joint CFPB and U.S. Department of Justice action, and the other for illegal credit card practices.
In those cases, Fifth Third Bank was ordered to pay $18 million to harmed black and Hispanic borrowers for the discriminatory auto loan pricing action; $3 million to harmed consumers for the illegal credit card practices; and a $500,000 penalty.