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U.S. Bank Misused Customer Records to Open Phony Accounts, Fined $37 Million

Though shocking, it’s not too unusual for bank employees to use customer records to open bogus checking accounts, credit cards and other services. U.S. Bank was aware its employees were dummying up accounts to meet sales goals, according to the Consumer Financial Protection Bureau (CFPB) , which today ordered the bank to compensate harmed customers and pay a $37;5 million penalty.

“For over a decade, U.S. Bank knew its employees were taking advantage of its customers by misappropriating consumer data to create fictitious accounts,” said CFPB Director Rohit Chopra. “We all must do more to hold lawbreaking companies accountable when they abuse and misuse our sensitive personal data.”

Wells Fargo was caught in a similar but much larger scheme a few years ago and ordered to pay $3 billion.

U.S. Bank (NASDAQ:USB) is a Minneapolis-based bank with over $559 billion in assets, making it the fifth largest bank in the U.S. It operates more than 2,800 banking branches across the nation.

The CFPB’s investigation found specific evidence that revealed that U.S. Bank was aware that sales pressure was leading employees to open accounts without authorization, and the bank had inadequate procedures to prevent and detect these accounts.

Sales pressure on employees

Specifically, U.S. Bank imposed sales goals on bank employees as part of their job requirements. U.S. Bank also implemented sales campaigns and an incentive-compensation program that financially rewarded employees for selling bank products.

U.S. Bank’s conduct harmed its customers in the form of unwanted accounts, negative effects on their credit profiles, and the loss of control over personally identifiable information. Customers also had to waste time and energy closing unauthorized accounts and resolving consequences stemming from them, including seeking refunds for improperly charged fees, CFPB said.

The CFPB’s order requires U.S. Bank to:

  • Pay a $37.5 million fine: U.S. Bank will pay a $37.5 million penalty to the CFPB, and the CFPB will deposit it into the CFPB’s victims relief fund. This fund provides compensation to consumers harmed by violations of federal consumer financial protection law.
  • Forfeit and return all unlawfully charged fees and costs to harmed customers: U.S. Bank must develop a plan to remediate harmed consumers by returning all unlawfully charged fees and costs, plus interest.

Read today’s order.

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