Bank Settles CFPB Charges for Opening "Sham Accounts" and Improper Credit Practices

A custodial bank settled CFPB charges for (i) applying for lines of credit and opening deposit accounts on behalf of customers without their consent, (ii) obtaining consumer reports with personal information without justification, and (iii) pressuring employees into selling products to customers to meet predetermined sales goals.

In the Consent Order, the CFPB found that the bank engaged in improper sales practices and set performance-based sales goals for its employees. According to the CFPB, this fostered an environment where employees felt obligated to engage in improper sales practices to meet mandatory sales goals. The CFPB determined that - without consumers’ knowledge and consent - bank employees (i) opened deposit accounts, (ii) submitted applications for and issued credit cards and (iii) opened lines of credit linked to deposit accounts. Additionally, the bank occasionally generated fees based on the products or services sold to the "sham accounts."

As a result, the CFPB determined that the bank violated Section 1642 of the Truth in Lending Act ("Issuance of credit cards"), Rule 226.12 of Regulation Z ("Special credit card provisions"), Section 1681b(f) of the Fair Credit Reporting Act ("Permissible purposes of consumer reports"), Section 4301(b) of the Truth in Savings Act ("Findings and purpose"), CFPB Rule 1030.4 ("Account disclosures"), and Section 5536 of the Consumer Financial Protection Act ("Prohibited acts").

The bank agreed to (i) pay a $37,500,000 civil monetary penalty and (ii) forfeit all unlawfully charged fees collected from unknowing customers in order to settle the charges.