Fifth Third accused of making accounts without customer consent

Federal regulators have filed a federal lawsuit Monday against Fifth Third, accusing the Cincinnati-based regional bank of driving sales by encouraging employees to set up accounts and credit cards without customers' knowledge.

The civil lawsuit filed by the federal Bureau of Consumer Financial Protection in federal court in Chicago alleges Fifth Third violated the Consumer Financial Protection Act’s prohibition against unfair and abusive acts or practices as well as the Truth in Lending Act and the Truth in Savings Act and their implementing regulations.

Fifth Third called the lawsuit "unnecessary and unwarranted."

The federal agency says Fifth Third's abusive behavior happened from 2008 until 2016 as part of a long-running "cross-sell" strategy. Instead of having "reasonable sales goals," federal officials said Fifth Third effectively goaded employees to break rules, while the bank turned a blind eye.

The Bureau is asking the federal court to grant an injunction to stop Fifth Third’s unlawful conduct, redress for affected consumers, and the imposition of a civil money penalty.

"Fifth Third’s employees, without consumers’ knowledge or consent, opened deposit accounts in consumers’ names; transferred funds from consumers’ existing accounts to new, improperly opened accounts; issued credit cards; enrolled consumers in online-banking services; and opened lines of credit on consumers’ accounts," the lawsuit said. "In short, Fifth Third focused on its own financial interests to the detriment of consumers."

The accusations against Fifth Third are eerily similar to those levied by the same regulator against Wells Fargo in 2016. Last month, Wells Fargo agreed to pay $3 billion to settle claims related to its creation of millions of fake accounts to meet sales goals.

Fifth Third said Monday it would defend itself against the charges in court.

“Fifth Third Bank respects and values the important role that the CFPB plays in protecting consumers but believes that the civil suit filed today is unnecessary and unwarranted. The Bank will defend itself vigorously and is confident in the outcome,” Susan Zaunbrecher, chief legal officer of Fifth Third Bank, said in a statement.

Bank officials said the regulators' case against the bank cites 1,100 unauthorized accounts set up by bank employees that the bank itself brought to their attention. The bank also denied that its sales goals or other policies encourage improper behavior.

“Fifth Third’s compensation and employee incentive structure does not reward retail employees for opening unauthorized accounts, nor does it give them sales quotas or product-specific targets," the bank said, adding it had internal controls to detect and stop inappropriate behavior.

The questionable accounts at the heart of the lawsuit entail 0.01%  of the 10 million accounts opened between 2010 and 2016, the bank said, adding affected customers were reimbursed "years ago."

“The Bank is confident that it has treated its customers fairly," Zaunbrecher said. "When a federal court examines the evidence, we believe it will agree with Fifth Third that this is a limited and historical event. The Bank will press for an early trial.”

The regulator lawsuit is the second public relations embarrassment this year for Fifth Third. Last month, the bank disclosed a data breach that had been perpetrated by an undisclosed number of employees that were subsequently fired and are the subject of an ongoing criminal investigation.