Fifth Third Bank, which has branches in 12 states, has agreed to pay $20 million to settle allegations related to creating fake customer accounts, selling clients unnecessary car insurance, and repossessing their vehicles when they failed to pay.
Excessive, Unlawful Customer Charges of Fifth Third Bank
In court papers filed on July 9, the Consumer Financial Protection Bureau (CFPB) said Fifth Third Bank improperly applied around 37,000 insurance policies from 2011 to 2019. The bank was fined $5 million and forced to compensate impacted clients.
According to the Washington Post, CFPB Director Rohit Chopra said the bank was unlawfully charging customers more than necessary for car loans, which led to the seizure of vehicles belonging to almost 1,000 individuals.
He added that Fifth Third Bank's top management and board of directors will be subject to further sanctions if they do not rectify these unethical business practices.
According to CNN, the bank responded by saying that the car insurance practices investigated by the CFPB had already been voluntarily discontinued in 2019, prior to the probe. Fifth Third chief legal officer Susan Zaunbrecher said in a statement that they have already done considerable work to address these legacy concerns.
This is the most recent move by the CFPB against Fifth Third. In 2020, the bank faced accusations of inappropriately creating accounts between 2010 and 2016. On July 9, Fifth Third settled the claims by agreeing to pay $15 million.
'Force-Placed Insurance'
The CFPB said Fifth Third Bank's vehicle loans included a "collateral protection insurance" clause that enabled the company to automatically include coverage for clients who do not have their own.
The agency dubbed this practice "force-placed insurance." This part was meant to give the bank a way to protect the car, which was used as collateral for the loan.
The CFPB found that over half of the bank's force-placed policies were issued to consumers who either had existing insurance or had obtained new coverage within 30 days of their previous policy expiration.
That means customers were pressured to pay for unnecessary insurance or suffer consequences such as repossession, increased costs, and delinquency.
Borrowers reportedly saw an increase of over $200 in their monthly auto payments due to the insurance plans' higher rates than they might have gotten elsewhere. According to the investigation, some clients became loan defaulters due to these illegal charges, and 1,005 customers had their cars repossessed.
Join the Conversation