Customers at Wells Fargo, largest U.S. bank by market capitalization, were pushed into fee-generating accounts they never requested, say regulators and the bank consequently agreed to pay $185 million in penalties and $5 million to customers.
"We regret and take responsibility for any instances where customers may have received a product that they did not request," the bank said of a settlement reached with California prosecutors and federal regulators. $100 million of the total penalties - the largest fine ever levied by the federal agency would be received by the Consumer Financial Protection Bureau.
"Today's action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences," said CFPB Director Richard Cordray.
The Office of the Comptroller of the Currency and Los Angeles officials were also party to the settlement.
Wells Fargo pushed customers into costly financial products that they did not need or even request, alleged California prosecutors in a complaint filed in May 2015.
According to the complaint, the bank asked the employees to push households to use eight products even when the average customer tapped six financial tools. The CFPB said that more than 2 million deposit and credit card accounts were opened by the bank that may not have been authorized.
The bank fired 5,300 employees over "inappropriate sales conduct", Wells Fargo spokeswoman Mary Eshet said. The bank has 100,000 employees in its branches, Eshet said, adding that the firings took place over a five-year period.
In a practice it calls "cross-sell", the number of products it sells to customers is regularly released by Wells Fargo. According to the bank's annual 10-K financial filing, up from 10.49 a year earlier, its wealth and investment management unit sold 10.55 products per retail banking household in November 2015 for example. The said that it was considering ore changes after it changed how it tallies up some of those numbers in the second quarter.
The crackdown on Wells Fargo will have much of an impact on others in the industry, views Piper Jaffray analyst Kevin Barker. "I think this is unique to Wells Fargo and their particular situation and how hard they push on cross-sell," he said.
On the other hand in another settlement news, as Chipotle Mexican Grill attempts to move on from a string of food-safety problems, lawyers for the consumers said that the company has agreed to financial settlements with more than 100 customers who fell ill after eating at its restaurants last year.
The fact that the company wants to avoid drawn-out public battles over foodborne illnesses that battered the company's stock price and reputation and is reflected in the burrito chain's strategy of resolving claims out of court, which has not previously been reported.
Following outbreaks of E. coli, norovirus and salmonella linked to its restaurants sickened more than 500 people last year and drove away customers, Chipotle has been working to revive sales growth.
A 9.9 percent stake in the company was purchased on Tuesday by activist investor William Ackman’s hedge fund.
The company "does right by our customers and simply wanted to make things right for people who were affected by any of those incidents," said Chipotle spokesman Chris Arnold when asked about reported settlements. He did not disclose details of settlements.
(Source:www.reuters.com)
"We regret and take responsibility for any instances where customers may have received a product that they did not request," the bank said of a settlement reached with California prosecutors and federal regulators. $100 million of the total penalties - the largest fine ever levied by the federal agency would be received by the Consumer Financial Protection Bureau.
"Today's action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences," said CFPB Director Richard Cordray.
The Office of the Comptroller of the Currency and Los Angeles officials were also party to the settlement.
Wells Fargo pushed customers into costly financial products that they did not need or even request, alleged California prosecutors in a complaint filed in May 2015.
According to the complaint, the bank asked the employees to push households to use eight products even when the average customer tapped six financial tools. The CFPB said that more than 2 million deposit and credit card accounts were opened by the bank that may not have been authorized.
The bank fired 5,300 employees over "inappropriate sales conduct", Wells Fargo spokeswoman Mary Eshet said. The bank has 100,000 employees in its branches, Eshet said, adding that the firings took place over a five-year period.
In a practice it calls "cross-sell", the number of products it sells to customers is regularly released by Wells Fargo. According to the bank's annual 10-K financial filing, up from 10.49 a year earlier, its wealth and investment management unit sold 10.55 products per retail banking household in November 2015 for example. The said that it was considering ore changes after it changed how it tallies up some of those numbers in the second quarter.
The crackdown on Wells Fargo will have much of an impact on others in the industry, views Piper Jaffray analyst Kevin Barker. "I think this is unique to Wells Fargo and their particular situation and how hard they push on cross-sell," he said.
On the other hand in another settlement news, as Chipotle Mexican Grill attempts to move on from a string of food-safety problems, lawyers for the consumers said that the company has agreed to financial settlements with more than 100 customers who fell ill after eating at its restaurants last year.
The fact that the company wants to avoid drawn-out public battles over foodborne illnesses that battered the company's stock price and reputation and is reflected in the burrito chain's strategy of resolving claims out of court, which has not previously been reported.
Following outbreaks of E. coli, norovirus and salmonella linked to its restaurants sickened more than 500 people last year and drove away customers, Chipotle has been working to revive sales growth.
A 9.9 percent stake in the company was purchased on Tuesday by activist investor William Ackman’s hedge fund.
The company "does right by our customers and simply wanted to make things right for people who were affected by any of those incidents," said Chipotle spokesman Chris Arnold when asked about reported settlements. He did not disclose details of settlements.
(Source:www.reuters.com)
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