CFPB Orders Fifth Third Bank to Pay $20 Million Over Forced Auto Insurance and Fake Accounts

The Consumer Financial Protection Bureau announced two enforcement actions against Fifth Third Bank, N.A. on 9 July 2024 — a consent order and a proposed court order — seeking a combined $20 million in civil money penalties. The actions address the bank's auto lending practices and the opening of unauthorised customer accounts.

The CFPB levied a $5 million civil money penalty in relation to the bank's practice of force-placing vehicle insurance on borrowers who already carried their own coverage. A separate $15 million penalty, issued through a proposed court order, resolves allegations surrounding the opening of fake accounts through what the bureau characterised as a cross-sell strategy in which employees opened products for customers without their knowledge or consent.

WRONGFUL REPOSSESSIONS AND ILLEGAL FEES

Between July 2011 and December 2020, Fifth Third charged illegal fees for force-placed insurance in more than 37,000 instances where the coverage was unnecessary or duplicative, charging those customers more than $12.7 million in fees the CFPB deemed illegal. Approximately 1,000 vehicles were wrongfully repossessed because the unnecessary insurance charges triggered payment delinquencies that would not otherwise have arisen.

The enforcement orders require the bank to provide redress to approximately 35,000 harmed consumers across both cases. The CFPB also found that, instead of refunding cancelled-coverage fees directly to borrowers, Fifth Third applied the refunds to their outstanding loan balances.

REPEAT ENFORCEMENT AND STRUCTURAL REMEDIES

The fake accounts order resolves a lawsuit the CFPB originally filed against Fifth Third in March 2020, which alleged that bank employees opened accounts without customer authorisation. The proposed order bans the bank from operating employee sales goals that could incentivise fraudulent account openings.

The bureau noted that this is not Fifth Third's first encounter with federal enforcement. The CFPB previously sanctioned the bank in 2015 for discriminatory auto loan pricing, requiring $18 million in consumer redress, and for illegal credit card practices, which carried $3 million in redress and a $500,000 civil penalty. CFPB Director Rohit Chopra said the bureau was ordering Fifth Third's senior executives and board of directors to "clean up these broken business practices or else face further consequences".