The Consumer Financial Protection Bureau (CFPB) hit Third Fifth Bank with a $20 million fine on Tuesday for allegedly forcing auto loan customers to buy unnecessary auto insurance policies, and in some cases repossessing their vehicles when they failed.
“The CFPB has caught Third Fifth Bank illegally charging excessive fees on auto loan bills, with almost 1,000 families losing their cars to repossess,” director Rohit Chopra said in a statement Tuesday. “We are ordering senior management and the board of directors at Fifth Third to clean up these corrupt business practices or face further consequences.”
Employees at the Ohio-based bank also illegally opened fake bank accounts for thousands of customers without their knowledge or consent under an initiative aimed at “cross-selling” by senior management, the CFPB alleged. Fifth Third bank executives and branch-level employees had their performance reviews and overall employment tied to meeting sales goals for offering more products to existing customers, CPFB officials said. The fine settles a March 2020 CFPB lawsuit filed against Fifth Third that focused on unauthorized bank accounts.
As part of the CFPB’s penalty, Fifth Third must compensate 35,000 customers who had accounts opened in their names or were pushed to buy auto insurance. The bank is also prohibited from creating sales pitches that encourage employees to open fake accounts. Fifth Third must pay a $15 million fine for opening fake accounts and another $5 million for forcing customers who already had auto insurance to get dual coverage, CFPB officials said.
The cars were repossessed when the false charges remained unpaid
Fifth Third engaged in the auto insurance practice for years, CFPB officials said, adding that the bank charged customers fees for duplicating coverage on cars already insured by another company. Some Fifth Third customers who lapsed on previous coverage but managed to get insurance within 30 days of the lapse were also charged for double coverage, according to the CFPB.
“These borrowers paid over $12.7 million in illegal and worthless fees,” the bureau said in a news release. “While consumers received worthless coverage, Fifth Third Bank benefited.”
Fifth Third said in a statement Tuesday that its unauthorized bank account practice occurred “with a limited number of accounts” between 2010 and 2016. The bank said it voluntarily ended its auto insurance practice in January 2019, which was before the CFPB began investigating the company.
“We have already taken significant actions to address these legacy issues, including identifying the issues and taking the initiative to fix things,” Susan Zaunbrecher, Fifth Third’s chief legal officer, said in the statement. “We constantly put our customers at the center of everything we do.”
Fifth Third, which was fined $18 million in 2015 for discriminatory auto lending practices against black and Hispanic customers, had $62 billion in assets under management as of April. The bank has 1,087 branches in 12 states in the South and Midwest.
Wall Street analysts said paying the $20 million fine will actually save Fifth Third money.
“We believe the actions put these issues to bed and should also result in lower litigation costs over time,” analysts at Jefferies said in a note on Tuesday. “The auto repossession clause is new to the public, but our understanding is that it applies to a very small percentage of auto loans. In our view, the small $5 million fine indicates the relative severity of this issue.”