Fifth Third Bank illegally seized people’s cars after overcharging them, authorities say

Fifth Third Bank illegally seized people’s cars after overcharging them, authorities say
Fifth Third Bank illegally seized people’s cars after overcharging them, authorities say

The Consumer Financial Protection Bureau (CFPB) on Tuesday fined Fifth Third Bank $20 million for allegedly forcing customers with auto loans to purchase unnecessary car insurance and, in some cases, taking away their vehicles when they failed to meet their payment obligations.

“The CFPB caught Fifth Third Bank illegally charging excessive fees on auto loans, causing nearly 1,000 families to lose their cars to repossession,” Director Rohit Chopra said in a statement Tuesday. “We call on Fifth Third’s senior executives and board to eliminate these criminal business practices or face further consequences.”

Employees of the Ohio-based bank also illegally opened fake bank accounts for thousands of customers without their knowledge or consent as part of a “cross-selling” sales target initiative by upper management, the CFPB alleged. The performance reviews and general employment of Fifth Third Bank managers and branch-level employees were tied to meeting sales targets of offering more products to existing customers, CPFB officials said. The fine settles a lawsuit filed by the CFPB against Fifth Third in March 2020 involving the unauthorized bank accounts.

Why are car insurance premiums rising?

As part of the CFPB’s penalty, Fifth Third must compensate the 35,000 customers whose accounts were opened in its name or who were pressured into buying the auto insurance. The bank is also prohibited from setting sales targets that encourage employees to open sham accounts. Fifth Third must pay a $15 million penalty for opening the sham accounts and another $5 million for forcing customers who already had auto insurance to buy duplicate insurance, CFPB officials said.

Cars were repossessed because incorrect fees were not paid

Fifth Third has been engaged in this auto insurance practice for years, CFPB officials said, adding that the bank charged customers for duplicate coverage on cars that were already insured with another company. Some Fifth Third customers whose previous coverage had expired but who managed to obtain insurance within 30 days of the expiration were also charged for duplicate coverage, according to the CFPB.

“These borrowers paid over $12.7 million in illegal, worthless fees,” the agency said in a press release. “While consumers received protection with no value, Fifth Third Bank profited.”

Fifth Third said in a statement Tuesday that the unauthorized bank account practice occurred “in a limited number of accounts” between 2010 and 2016. The bank said it voluntarily stopped its auto insurance practice in January 2019, before the CFPB began investigating the company.

“We have already taken significant steps to address these legacy issues, including identifying problems and taking initiative to make things right,” Susan Zaunbrecher, general counsel for Fifth Third, said in the statement. “We consistently put our customers at the center of everything we do.”

Fifth Third, which was fined $18 million in 2015 for discriminatory auto loan practices against black and Hispanic customers, managed $62 billion in assets as of April. The bank has 1,087 branches in 12 states in the South and Midwest.

Wall Street analysts said Fifth Third would actually save money by paying the $20 million fine.

“We believe these measures will resolve these issues and also lead to lower litigation costs over time,” Jefferies analysts said in a note on Tuesday. “The issue of auto repossession is new to the public, but to our knowledge it affects only a very small percentage of auto loans. The small fine of $5 million, in our view, indicates the relative severity of this problem.”

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