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Illegal banking practices finally caught up to Wells Fargo (WFC - Free Report) . The bank was fined $185 million, including a $100 million penalty from the Consumer Financial Protection Bureau, $35 million to the office of the Comptroller of the Currency, and $50 million to the City and Country of Los Angeles.
Dating back to 2011, the illegal practices include Wells Fargo employees secretly issuing credit cards without any consent from the customer, as well as creating false email accounts in order to sign up customers for online banking services. These customers only learned about the fake accounts after they began accumulating high fees, according to The New York Times.
Regulators allege that Wells Fargo opened a total of roughly 1.5 million deposit accounts and applied for 565,000 credit cards. Debit cards were also requested and issued without any knowledge or consent from customers, with some employees even creating PINs.
"Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses," Richard Cordray, director of the CFPB, said in a statement. “Because of the severity of these violations, Wells Fargo 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,” Mr. Cordray continued.
As a result, Wells Fargo has agreed to pay $2.6 million to refund fees that were charged. The bank also fired around 5,300 employees in connection to these illegal practices.
Mastercard Sued for $19 Billion
Across the pond, credit card issuer Mastercard Inc. (MA - Free Report) is getting sued for £14 billion, or $19 billion, in damages for allegedly charging customers excessive fees.
The case was brought by a former chief financial services regulator, who claims that Mastercard charged “unlawfully” high fees to retailers when shoppers used wither their debit or credit cards. The payments company allegedly did this for 16 years between 1992 and 2008.
Mastercard, though, isn’t going down without a fight, and the company has denied any wrongdoing. "Now that the claim has been filed, we will take time to review it in detail. However, we continue to firmly disagree with the basis of this claim and we intend to oppose it vigorously," Mastercard said.
About 46 million people in Britain may potentially benefit from the lawsuit; any person who lived in Britain, who used a credit card, cash or checks, and who was over 16 years old during the time period of the suit will automatically be a part of the claim. And even consumers who are no longer living in Britain, but who were residents during the 16-year time period, can opt in to the lawsuit.
Hearings for the case are not expected to begin until 2018 unless Mastercard settles the lawsuit out of court.
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Banking Round-Up: Wells Fargo Fined $185 Million, Mastercard Sued for $19 Billion
Illegal banking practices finally caught up to Wells Fargo (WFC - Free Report) . The bank was fined $185 million, including a $100 million penalty from the Consumer Financial Protection Bureau, $35 million to the office of the Comptroller of the Currency, and $50 million to the City and Country of Los Angeles.
Dating back to 2011, the illegal practices include Wells Fargo employees secretly issuing credit cards without any consent from the customer, as well as creating false email accounts in order to sign up customers for online banking services. These customers only learned about the fake accounts after they began accumulating high fees, according to The New York Times.
Regulators allege that Wells Fargo opened a total of roughly 1.5 million deposit accounts and applied for 565,000 credit cards. Debit cards were also requested and issued without any knowledge or consent from customers, with some employees even creating PINs.
"Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses," Richard Cordray, director of the CFPB, said in a statement. “Because of the severity of these violations, Wells Fargo 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,” Mr. Cordray continued.
As a result, Wells Fargo has agreed to pay $2.6 million to refund fees that were charged. The bank also fired around 5,300 employees in connection to these illegal practices.
Mastercard Sued for $19 Billion
Across the pond, credit card issuer Mastercard Inc. (MA - Free Report) is getting sued for £14 billion, or $19 billion, in damages for allegedly charging customers excessive fees.
The case was brought by a former chief financial services regulator, who claims that Mastercard charged “unlawfully” high fees to retailers when shoppers used wither their debit or credit cards. The payments company allegedly did this for 16 years between 1992 and 2008.
Mastercard, though, isn’t going down without a fight, and the company has denied any wrongdoing. "Now that the claim has been filed, we will take time to review it in detail. However, we continue to firmly disagree with the basis of this claim and we intend to oppose it vigorously," Mastercard said.
About 46 million people in Britain may potentially benefit from the lawsuit; any person who lived in Britain, who used a credit card, cash or checks, and who was over 16 years old during the time period of the suit will automatically be a part of the claim. And even consumers who are no longer living in Britain, but who were residents during the 16-year time period, can opt in to the lawsuit.
Hearings for the case are not expected to begin until 2018 unless Mastercard settles the lawsuit out of court.
Interested in the other top stories of the week? Listen to Zacks Friday Finish Line to catch up on the week’s financial and investment news.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>