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WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) has imposed penalties on Fifth Third Bank for engaging in a series of unlawful activities, including wrongful auto repossessions and the opening of unauthorized accounts. The bank will pay $20 million in fines and provide redress to roughly 35,000 affected consumers.
According to the CFPB's findings, Fifth Third Bank, a subsidiary of Fifth Third Bancorp (NASDAQ: NASDAQ:FITB), was involved in illegal practices from July 2011 to December 2020. The bank wrongfully charged borrowers for unnecessary and duplicative vehicle insurance, leading to over 37,000 instances where customers paid more than $12.7 million in unwarranted fees.
The bank also profited by reinsuring its coverage program, collecting fees that substantially exceeded any claims made under the program.
In addition to the overcharges, the bank's practices resulted in nearly 1,000 wrongful vehicle repossessions. Borrowers were forced to pay for redundant coverage or face delinquency, further fees, and the loss of their vehicles.
The CFPB's enforcement action also addresses the creation of fake customer accounts, a practice uncovered in a March 2020 lawsuit. The bank used a "cross-sell" strategy to sell more products to existing customers, which led to the opening of unauthorized accounts.
The CFPB's order requires Fifth Third Bank to compensate the harmed consumers and bans the bank from setting sales quotas that could lead to such fraudulent account openings in the future. The bank must pay a $5 million penalty for the insurance-related violations and, pending court approval, an additional $15 million for the unauthorized accounts. These penalties will go to the CFPB's victims relief fund.
This is not the first time Fifth Third Bank has faced regulatory action. In 2015, the bank was ordered to pay $18 million to minority borrowers who were victims of discriminatory auto loan pricing and $3 million to consumers affected by illegal credit card practices, alongside a $500,000 penalty.
The CFPB, established to enforce federal consumer financial laws, aims to ensure fair, transparent, and competitive markets for consumer financial products. The agency encourages consumers to report complaints and employees to report violations of consumer financial protection laws.
Based on a press release statement, the CFPB continues to take measures against institutions that engage in unfair, deceptive, or abusive practices, safeguarding consumers' financial interests.
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