WASHINGTON, D.C. — In the world of banking, another scandal unfolds as the Consumer Financial Protection Bureau (CFPB) brings the hammer down on Fifth Third Bank. The bank, with an extensive reach across 12 states, has been slapped with penalties totaling $20 million and ordered to compensate tens of thousands of customers it allegedly wronged.
The Cincinnati-based Fifth Third Bank, a financial behemoth boasting $214 billion in assets, finds itself at the center of a storm stirred up by its own illegal activities.
The CFPB is accusing Fifth Third Bank of a range of rogue practices, including pressuring auto loan holders into unnecessary insurance. This resulted in nearly 1,000 families having their vehicles repossessed. The regulatory body has subsequently ordered the bank to pay a $5 million penalty for thrusting unwanted insurance burden on borrowers who were already insured.
“Almost 1,000 families lost their cars to repossession due to Fifth Third Bank wrongly inflating auto loan bills,” expressed CFPB Director Rohit Chopra. He further stated that the leadership at Fifth Third Bank must rectify these missteps or prepare to face ever sterner consequences.
It doesn’t end there. The bank is being accused of creating fraudulent accounts in the names of its customers. A proposed court order could impose an additional $15 million penalty and restrict its ability to set sales targets that might encourage such malpractices.
According to the CFPB, between 2011 and 2020, the bank coerced borrowers into redundant coverage policies leading to over $12.7 million in illegal charges. Rather than directly refunding the unjustly collected fees, the bank applied these sums toward the outstanding loan balances. In simple terms, this means the bank pocketed millions while providing no value in return.
Aside from imposing hefty charges, the bank allegedly threatened customers with delinquencies, additional fees, and even vehicle repossession if they failed to comply with the bank’s insistence on unnecessary coverage.
The CFPB’s second lawsuit against Fifth Third Bank builds upon its March 2020 case where the bank was accused of creating “phantom” customer accounts as part of a cross-selling strategy to push more products and services onto existing customers.
The CFPB, authorized to take enforcement action against institutions flouting consumer financial protection laws, is requiring Fifth Third Bank to reimburse the victims of its alleged misdemeanors. The orders also seek to prevent the bank from setting sales targets that could lead to the creation of unauthorized accounts, and to pay up the fines totaling $20 million.
This isn’t the first time Fifth Third Bank has crossed swords with the CFPB. In 2015, the bank was penalized for discriminatory auto loan pricing and illegal credit card practices, leading to a multimillion-dollar settlement.
This latest saga highlights the imperative for banking institutions to conduct business with integrity and respect for consumer rights.
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