Fifth Third to pay $20M plus redress for illegal activities

The CFPB on July 9, 2024, took action against repeat offender Fifth Third Bank for a range of illegal activities that would result in the bank paying $20 million in penalties in addition to paying redress to approximately 35,000 harmed consumers, including about 1,000 who had their cars repossessed. Specifically, the CFPB is ordering Fifth Third Bank to pay a $5 million penalty for forcing vehicle insurance onto borrowers who had coverage. The CFPB also filed a proposed court order that would require Fifth Third Bank to pay a $15 million penalty for opening fake accounts in the names of its customers. The proposed court order bans Fifth Third Bank from setting employee sales goals that incentivize fraudulently opening accounts.

Fifth Third Bancorp (NASDAQ: FITB) is a large 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 illegally triggered repossessions and charged illegal fees by forcing loan 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 either always maintained their own coverage or obtained the requisite coverage within a 30-day timeframe of their prior policy lapsing. Specifically, Fifth Third Bank’s conduct harmed borrowers by:

• Charging extra fees for unnecessary and duplicative coverage: In more than 37,000 instances, Fifth Third Bank illegally charged fees that provided no value at all. In some cases, the policy was duplicative of coverage borrowers already had on their vehicles. Some cases involved the consumer obtaining the requisite coverage within 30 days of lapse and did not have the force-placed policy canceled in its entirety. These borrowers paid over $12.7 million in illegal, worthless fees. While consumers received coverage with no value, Fifth Third Bank profited. When the unnecessary or duplicative coverage was cancelled, borrowers were entitled to a refund of the illegally charged fees. 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 getting paid fees that far exceeded any claim losses under the program.
• Punishing borrowers with repossessions: Fifth Third Bank demanded borrowers pay for coverage they did not need or else face delinquency, additional fees, and repossessions. Fifth Third Bank conducted repossessions of vehicles when the delinquency was caused by the bank charging unnecessary and duplicative coverage.

The second of the two actions announced on July 9 resolves the CFPB’s March 2020 lawsuit against Fifth Third Bank for creating fake customer accounts and using a “cross-sell” strategy to increase the number of products and services it provided to existing customers. The proposed order would require the bank to:

• Make harmed consumers whole: The orders require Fifth Third Bank to pay redress to about 35,000 harmed consumers.
• Ban sales goals that led to fake accounts: The proposed order would prohibit the bank from setting sales goals for its employees that incentivize the opening of unauthorized accounts.
• Pay $20 million in fines: Fifth Third Bank must also pay a $5 million penalty for its illegal activity, and if the court enters the proposed order, a $15 million penalty for opening unauthorized accounts. Both penalties will be deposited to the CFPB’s victims relief fund.