CFPB Orders Fifth Third Bank to Pay for CPI Caused Repossessions

Ordered to Pay $20M

On Tuesday, the Consumer Financial Protection Bureau (CFPB) announced that they have fined Fifth Third Bank $20M dollars for what they describe as “a range of illegal activities.” Of the approximate 35K harmed customers 1K had their vehicles repossessed as the result of the placement of collateral protection insurance (CPI). For that, they have been fined $5M alone.

CPI has always been a thorn in the sides of class action attorneys and regulators. When it causes inflated payments, it creates delinquency that can lead to repossessions. But when there is demonstrative harm inflicted on the consumer as a result of improper CPI placements, it is sure to catch someone’s attention.

And it did.

Read today’s order on illegal auto lending practices.

Read today’s proposed court order on fake accounts.

CFPB Takes Action Against Fifth Third for Wrongfully Triggering Auto Repossessions and Opening Fake Bank Accounts

Bank will pay consumer redress and is banned from using sales quotas that spawn fraud

JUL 09, 2024 – WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today 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.

“The CFPB has caught Fifth Third Bank illegally loading up auto loan bills with excessive charges, with almost 1,000 families losing their cars to repossession,” said CFPB Director Rohit Chopra. “We are ordering the senior executives and board of directors at Fifth Third to clean up these broken business practices or else face further consequences.”

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 today 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.

Enforcement Actions

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws, including those engaging in unfair, deceptive, or abusive acts or practices. The CFPB’s order requires and, if entered by the court, 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.

In 2015, the CFPB took two actions against the bank – one for discriminatory auto loan pricing, which was a joint CFPB and U.S. Department of Justice action, and the other for illegal credit card practices. For the discriminatory auto loan pricing action, Fifth Third Bank was ordered to pay $18 million to harmed Black and Hispanic borrowers. For the illegal credit card practices, the bank was ordered to pay $3 million to harmed consumers and a $500,000 penalty.

Read today’s order on illegal auto lending practices.

Read today’s proposed court order on fake accounts.

CFPB Orders Fifth Third Bank to Pay for CPI Caused Repossessions – CFPB Orders Fifth Third Bank to Pay for CPI Caused Repossessions – CFPB Orders Fifth Third Bank to Pay for CPI Caused Repossessions – CFPB Orders Fifth Third Bank to Pay for CPI Caused Repossessions

CFPB Orders Fifth Third Bank to Pay for CPI Caused Repossessions – Consumer Financial Protection Bureau – CFPB – Repossession – Credit Union Collections – Credit Union Collectors – Delinquency – Fair Debt Collection Practices Act – FDCPA