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Fifth Third Facing CFPB Fake Account Enforcement Action (2)

March 2, 2020, 2:40 PMUpdated: March 2, 2020, 5:00 PM

Fifth Third Bancorp. said it’s facing a Consumer Financial Protection Bureau enforcement action over allegations the bank opened unauthorized accounts on behalf of customers.

The CFPB’s staff has said it plans to file an enforcement action over false account generation, the Cincinnati-based bank said in a filing Monday with the U.S. Securities and Exchange Commission. No timing was provided.

Fifth Third said it didn’t know how large the enforcement action would be, but said it had set aside reasonable reserves for any action.

The bank said in its filing that it believes “the facts do not warrant an enforcement proceeding” and that it intends to defend itself “vigorously.”

Laura Trujillo, a spokeswoman for Fifth Third, said the bank cooperated with the CFPB in its investigation, but had no further comment.

Representatives for the CFPB could not be reached for comment.

The extent of the alleged unauthorized account activity at Fifth Third Bank was unclear, as well as how far back the alleged actions took place.

News of the pending enforcement action against Fifth Third comes as Wells Fargo & Co. continues to dig out from its fake accounts scandal, in which bank employees allegedly opened millions of unauthorized deposit and credit accounts to meet sales targets.

Wells Fargo on Feb. 21 agreed to a $3 billion settlement with the Justice Department and SEC to resolve those agencies’ claims in the fake account scandal. The San Francisco-based bank has paid out more than an additional $1 billion in settlements with the CFPB, the Office of the Comptroller of the Currency and the Los Angeles City Attorney’s office, as well as private class action settlements.

Wells Fargo is currently on its third chief executive since the fake account scandal started in September 2016.

Regulatory Scrutiny

Fifth Third may not be the only bank to face a fake account enforcement action in the near future. CFPB Director Kathleen Kraninger in September 2019 denied a bid by Bank of America to close an in investigation into alleged fake account generation stretching back to 2014.

Wells Fargo’s case spurred banking regulators to scrutinize other financial institutions for similar patterns, meaning there could be more CFPB enforcement actions over unauthorized accounts in the future, said Julie Hill, a banking law professor at the University of Alabama School of Law.

“It doesn’t surprise me that much that other banks have problems, because banks operate a lot in the same way,” Hill said.

Joseph Otting, head of national bank regulator the Comptroller of the Currency, said in mid-2018 his agency had found 40 banks had created financial accounts without customer permission.

The OCC didn’t view the findings as “systemic” in the banking industry, but said they did merit better controls, Otting said in a June 2018 Senate Banking Committee hearing.

(Updates with comment from law professor)

To contact the reporters on this story: Lydia Beyoud in Washington at lbeyoud@bloomberglaw.com; Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

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