Fifth Third Bank, headquartered in Cincinnati, Ohio, has agreed to a $20 million settlement with the Consumer Financial Protection Bureau (CFPB) following an investigation into its auto insurance practices and a 2020 lawsuit over the creation of fake accounts.
This decision marks a significant conclusion to ongoing scrutiny of the bank’s business practices, shedding light on the broader issues within the financial industry concerning customer exploitation and fraudulent activities.
The CFPB’s investigation revealed that Fifth Third Bank had been charging customers for unnecessary auto insurance policies, a practice that affected over 35,000 customers. More disturbingly, the unnecessary charges led to the repossession of vehicles for more than 1,000 individuals. According to the CFPB, the bank’s actions forced borrowers to pay for coverage they did not need, leading to delinquency, additional fees, and ultimately, repossession. The agency stated that the repossessions were often the direct result of the bank imposing these unnecessary and duplicative insurance policies.
Rohit Chopra, the director of the CFPB, emphasized the severity of the bank’s misconduct, noting that the penalties serve as a warning for the bank to rectify its business practices or face further consequences. To address the harm caused, Fifth Third Bank is required to pay $5 million in redress to the affected customers. This compensation aims to mitigate the financial damage suffered by those who were unjustly charged and had their vehicles repossessed.
In addition to the penalties related to auto insurance practices, the CFPB has also filed a proposed court order mandating Fifth Third Bank to pay $15 million for incentivizing employees to create fake customer accounts. This practice, driven by aggressive sales goals, led to fraudulent account openings, undermining the trust and financial stability of the bank’s customers. The proposed order not only imposes financial penalties but also prohibits the bank from setting employee sales goals that encourage such fraudulent behavior.
Susan Zaunbrecher, chief legal officer of Fifth Third, stated that the settlement concludes both the litigation concerning sales practices and the separate investigation into the bank’s auto finance servicing activities. She highlighted that the bank had already taken significant steps to address these legacy issues, including shutting down the problematic collateral protection insurance program in 2019, before the CFPB began its investigation. Zaunbrecher reiterated the bank’s commitment to putting customers at the center of its operations and rectifying the identified issues.
The penalties imposed will be directed into the CFPB’s victim relief fund, ensuring that the affected customers receive the restitution they deserve. This fund is designed to provide compensation to consumers who have been harmed by violations of consumer financial protection laws, offering a measure of justice and financial relief.
This settlement is not the first instance of Fifth Third Bank facing penalties from the CFPB. In 2015, the bank was ordered to pay $18 million to Black and Hispanic borrowers who were victims of discriminatory auto loan pricing. Additionally, the bank was fined $3 million and an additional $500,000 penalty for illegal credit card practices. These repeated violations highlight a troubling pattern within the bank’s operations, underscoring the need for rigorous oversight and substantial reforms to protect consumers from predatory practices.
The resolution of these cases against Fifth Third Bank underscores the importance of regulatory bodies like the CFPB in safeguarding consumer rights and ensuring accountability within the financial industry. The penalties and corrective measures imposed serve as a reminder to financial institutions of the consequences of exploiting customers and engaging in fraudulent activities. As the industry continues to evolve, it is crucial for banks to prioritize ethical practices and maintain the trust and confidence of their customers.
Looking forward, it remains to be seen how Fifth Third Bank will implement the required changes and rebuild its reputation. The ongoing scrutiny from regulatory agencies and the public will likely influence the bank’s future operations, pushing it toward greater transparency and customer-centric practices. As financial institutions navigate the complexities of modern banking, the emphasis must remain on fair treatment, accountability, and the protection of consumer interests.
