Wells Fargo to pay USD 3 bln to settle fake accounts scandal: US govtPTI | Newyork | Updated: 22-02-2020 03:56 IST | Created: 22-02-2020 03:37 IST
Wells Fargo has agreed to pay US regulators USD 3 billion to settle three investigations into the bank's damaging fake accounts scandal, the Department of Justice said on Friday. The fine settles criminal and civil liability in the case in which the nation's fourth largest bank between 2002 and 2016 pressured employees to meet unrealistic sales goals that led to creating millions of accounts or credit cards without consent.
Wells Fargo admitted it collected millions in fees and interest, harmed the credit ratings of certain customers, and misused personal information, the Justice Department said in a statement. The Securities and Exchange Commission said USD 500 million of the total will be returned to investors.
"When companies cheat to compete, they harm customers and other competitors," Deputy Assistant Attorney General Michael D Granston said in a statement. After shifting its strategy in 1998 to emphasise increased sales, the Justice Department said bank employees resorted to unlawful means to move financial products such as fraud, identity theft and the falsification of bank records.
Within Wells Fargo the practice was referred to as "gaming," the Justice Department said. "Today's announcement should serve as a stark reminder that no institution is too big, too powerful, or too well-known to be held accountable and face enforcement action for its wrongdoings," said Andrew Murray, US Attorney for the Western District of North Carolina.
Employees went as far as "forging customer signatures to open accounts without authorisation, creating PINs to activate unauthorized debit cards, moving money from millions of customer accounts... opening credit cards and bill pay products without authorization," among other tactics, prosecutors said. Bank executives were aware that this was going on, and an internal investigator in 2004 referring to it as a "growing plague." But nothing was done to stop it.
"The following year, another internal investigator said the problem was 'spiraling out of control,'" prosecutors said. Under the terms of the Justice Department agreement, Wells Fargo acknowledged the allegations and agreed not to commit similar offenses for three years, in exchange for prosecutors waiving filing charges.
The San Francisco-based bank can easily absorb the fine because it had set aside USD 3.9 billion at the end of June last year to settle legal disputes, including those related to its business practices. US authorities last month fined John Stumpf, who served as Wells Fargo's chief executive from 2005 to October 2016, USD 17.5 million and banned him for life from the banking sector.
Two CEOs and other senior executives at the bank have lost their jobs amidst the probe into the scandal and outrage over claims the bank was slow to correct it. Charlie Scharf, who took over as CEO last October, has promised to revive the bank, whose 2019 results have been hit by the scandal.
The bank already has paid out USD 4 billion in financial penalties related to its business practices.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)
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