by Daniel Alter

The Enforcement Action:

On September 8, 2016, the U.S. Consumer Financial Protection Bureau (“CFPB”), the U.S. Comptroller of the Currency (“OCC”), and the Los Angeles City Attorney (“LACA”) announced that they had settled regulatory enforcement and consumer protection actions against Wells Fargo Bank, NA (“Wells Fargo” or “Bank”),[1] the nation’s second largest bank.[2]  As disclosed by the CFPB’s investigation, the nature and scope of the Bank’s misconduct was truly astounding.

The CFBP found that, over the course of more than five years, thousands of Wells Fargo employees had:  (1) opened more than 1.5 million deposit accounts without client consent; (2) transferred funds between client accounts without client consent; (3) applied for almost 600,000 client credit cards without client consent; (4) issued client debit cards without client consent; and (5) enrolled clients in on-line banking services without client consent.[3]  As a result of these unauthorized and abusive transactions, the Bank charged customers approximately $2 million in fraudulent deposit-account fees and more than $400,000 in fraudulent credit-card related fees.[4]

This widespread client deception was not driven, however, by the relatively de minimis revenue that it generated for Wells Fargo.  Rather, the CFPB concluded that the Bank’s “employees engaged in [the misconduct] to satisfy sales goals and earn financial rewards under [the Bank’s] incentive compensation program.”[5] In all, Wells Fargo “terminated roughly 5300 employees” over five years “for engaging” in these schemes[6] – which is an astonishing number of dishonest personnel and nothing less than an internal compliance disaster. Continue reading →