CFPB Takes Action Against Fifth Third for Improperly Triggering Auto Repossessions and Opening Fake Bank Accounts

WASHINGTON DC – The Consumer Financial Protection Bureau (CFPB) today took action against repeat offender Fifth Third Bank for a series of illegal activities that would result in the bank paying $20 million in fines and compensating approximately 35,000 harmed consumers, including approximately 1,000 who had their cars repossessed. Specifically, the CFPB is ordering Fifth Third Bank to pay a $5 million fine for forcing auto insurance on borrowers who had coverage. The CFPB also filed a proposed injunction that would require Fifth Third Bank to pay a $15 million fine for opening fraudulent accounts in the names of its customers. The proposed injunction prohibits Fifth Third Bank from setting sales targets for employees that encourage fraudulent account openings.

“The CFPB caught Fifth Third Bank illegally loading auto loan accounts with excessive fees, with nearly 1,000 families losing their cars to repossession,” said CFPB Director Rohit Chopra. “We are ordering Fifth Third’s senior executives and board of directors to clean up these broken business practices or face further consequences.”

Fifth Third Bancorp (NASDAQ: FITB) is a major bank holding company with $214 billion in assets headquartered in Cincinnati, Ohio. Fifth Third Bank operates approximately 1,300 branches in 12 states, primarily in the Midwest and Southeast, offering financial services including credit cards, mortgages, home equity lines of credit, and auto loans.

Today’s CFPB order, the first of the actions, addresses the CFPB’s findings that Fifth Third Bank unlawfully triggered repossessions and charged unlawful fees by forcing borrowers into unnecessary and duplicative coverage policies. Between July 2011 and December 2020, more than 50% of the policies were charged to borrowers who had always maintained their own coverage or obtained the necessary coverage within 30 days of their previous policy’s expiration. Specifically, Fifth Third Bank’s conduct harmed borrowers by:

• Charging extra fees for unnecessary and duplicate coverage: In more than 37,000 cases, Fifth Third Bank illegally charged fees that provided no value. In some cases, the policies were duplicative of coverage that borrowers already had on their vehicles. Some cases involved consumers obtaining the necessary coverage within 30 days of expiration and not having the entire policy forcibly canceled. These borrowers paid more than $12.7 million in illegal and worthless fees. While consumers received worthless coverage, Fifth Third Bank profited. When unnecessary or duplicative coverage was canceled, borrowers were entitled to a refund of the fees it had illegally charged. But instead of refunding the money directly to borrowers, Fifth Third Bank applied the refunds to consumers’ outstanding loan balances. Fifth Third also reinsured its coverage program and made millions by collecting fees that far exceeded any losses from claims under the program.
• Punishing borrowers with repossessions: Fifth Third Bank required borrowers to pay for coverage they did not need or face defaults, additional fees, and repossessions. Fifth Third Bank conducted repossessions of vehicles when the default was caused by the bank charging unnecessary and duplicate coverage.

Second of two actions announced today resolves CFPB’s March 2020 issue lawsuit against Fifth Third Bank for creating fake customer accounts and using a “cross-selling” strategy to increase the number of products and services provided to existing customers.

Enforcement actions

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions that violate consumer financial protection laws, including those that engage in unfair, deceptive, or abusive acts or practices. The CFPB’s order requires, and if issued by the court, the proposed order would require, the bank to:

• Redressing harmed consumers:The orders require Fifth Third Bank to pay damages to about 35,000 harmed consumers.
• Ban sales targets that led to fake accounts: The proposed order would prohibit the bank from setting sales targets for its employees that encourage the opening of unauthorized accounts.
• Pay $20 million in fines: Fifth Third Bank must also pay a $5 million fine for its illegal activity and, if the court grants the proposed order, a $15 million fine for opening unauthorized accounts. Both fines will be deposited in the CFPB Victims Assistance Fund.

In 2015, the CFPB took over two actions against the bank—one for discriminatory auto loan pricing, which was a joint action by the CFPB and the U.S. Department of Justice, and the other for illegal credit card practices. For the discriminatory auto loan pricing action, Fifth Third Bank was ordered to pay $18 million to harmed black and Hispanic borrowers. For the illegal credit card practices, the bank was ordered to pay $3 million to harmed consumers and a fine of $500,000.

Read today’s order on illegal auto lending practices.

Read today’s proposed court order on fake accounts.

Consumers can file complaints about financial products and services by visiting the CFPB website or calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal consumer financial protection laws are encouraged to submit information about what they know to whistleblower@cfpb.gov. To learn more about how to report potential misconduct in the industry, visit the CFPB website.

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit www.finançasconsumidor.gov.

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