The Consumer Financial Protection Bureau ("CFPB") fined a bank $100 million for "the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts."

According to the CFPB's enforcement action, the bank:

  • opened roughly 1.5 million deposit accounts that may not have been authorized by consumers, and then fraudulently transferred funds from consumers' authorized accounts to temporarily fund the new, unauthorized accounts;
  • applied for roughly 565,000 credit card accounts that may not have been authorized by consumers, for which many consumers incurred annual fees, as well as associated finance or interest charges and other fees;
  • requested and issued debit cards without consumers' knowledge or consent, including the creation of security PINs without telling customers; and
  • created phony email addresses for consumers in order to enroll them in online-banking services without their knowledge or consent.

The CFPB blamed unmonitored sales practices and certain compensation incentives for the widespread illegal behavior. CFPB Director Richard Cordray remarked:

Because of the severity of these violations, [the bank] is paying the largest penalty the CFPB has ever imposed. Today's action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.

In addition to paying full restitution to all victims and a $100 million fine to the CFPB's Civil Penalty Fund, the bank will be required to pay an additional $35 million penalty to the Office of the Comptroller of the Currency, and another $50 million to the City and County of Los Angeles.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.