Cincinnati-based Fifth Third Bank agrees to $20 million in fines

A consumer bank with a location in Columbus has reached a $20 million settlement with regulators to resolve litigation related to its sales practices and an investigation into its auto finance servicing activities.

Fifth Third Bank said Tuesday that it agreed to pay a $15 million fine to the Consumer Financial Protection Bureau, or CFPB, for its sales practices and a $5 million fine for auto finance servicing activities.

Those fines are in addition to paying redress to approximately 35,000 harmed consumers, including about 1,000 who had their cars repossessed, according to the federal regulator.

Fifth Third Bank is headquartered in Cincinnati and has 100 locations in Indiana, including a branch at 2117 25th St. in Columbus, according to the bank’s website.

“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,” CFPB Director Rohit Chopra said in a statement. “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.”

According to regulators, Fifth Third Bank illegally charged more than 37,000 customers over $12.7 million in unnecessary and duplicative auto insurance fees, providing no value and often duplicating existing coverage.

Instead of refunding the money directly to borrowers, the bank applied refunds to outstanding loan balances and profited through a reinsurance scheme by getting paid fees that far exceeded any claim losses under the program, according to the CFBP.

Additionally, the bank threatened borrowers with delinquency, extra fees, and vehicle repossessions due to these unnecessary charges, leading to repossessions when delinquencies were caused by the bank’s own actions, according to regulators.

In a separate dispute, the ligitation, filed in 2020 by the Consumer Financial Protection Bureau in U.S. District Court for the Northern District of Illinois, alleged that the bank’s employees opened fake accounts for customers in order to meet aggressive sales targets, The Associated Press reported.

The federal regulator further alleged that the bank knew its employees were opening fake accounts since at least 2008 and up until 2016, the same year that Wells Fargo admitted its own employees had opened fake accounts to meet aggressive sales goals. Wells Fargo was forced to pay billions of dollars in fines and penalties for its bad behavior.

The CFPB alleges that some of the fake Fifth Third accounts were actually funded, meaning bank employees moved money from a customer’s existing account to their new one, without their consent, according to wire reports. Fifth Third’s sales program required the accounts to be funded, so once the employee was credited for the sale, the money was moved back.

However, moving money without a customer’s consent is a violation of the Truth in Savings Act.

In a statement to the AP in 2000, Cincinnati-based Fifth Third said the CFPB’s lawsuit was unnecessary. The bank said it had already investigated the allegations and found 1,100 accounts were opened fraudulently out of 10 million existing accounts and the amount of financial damage caused by these employees was less than $30,000.

In another statement Tuesday, Fifth Third Bank said the disputed sales practices were related a “limited number of accounts” and that the auto finance servicing activities in question were “voluntarily discontinued” in 2019.

“The settlement resolves disputed sales practices issues related to a limited number of accounts opened beginning in 2010 and ending in 2016,” the bank said in a statement. “The settlement also addresses the CFPB’s concerns about an auto collateral protection insurance program that Fifth Third voluntarily discontinued in January 2019.”