Wells Fargo has long been the envy of the banking industry for its ability to sell multiple products to the same customer, but regulators on Thursday said those practices went too far in some instances.
The largest U.S. bank by market capitalization will pay $185 million in penalties and $5 million to customers that regulators say were pushed into fee-generating accounts they never requested.
“We regret and take responsibility for any instances where customers may have received a product that they did not request,” the bank said of a settlement reached Thursday with California prosecutors and federal regulators.
The Consumer Financial Protection Bureau will receive $100 million of the total penalties – the largest fine ever levied by the federal agency.
“Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences,” said CFPB Director Richard Cordray.
Los Angeles officials and the Office of the Comptroller of the Currency were also party to the settlement.
In a complaint filed in May 2015, California prosecutors alleged that Wells Fargo pushed customers into costly financial products that they did not need or even request.
Bank employees were told that the average customer tapped six financial tools but that they should push households to use eight products, according to the complaint.
The bank opened more than 2 million deposit and credit card accounts that may not have been authorized, the CFPB said Thursday.
Wells Fargo spokeswoman Mary Eshet said the bank fired 5,300 employees over “inappropriate sales conduct.” The firings took place over a five-year period, Eshet said, adding that the bank has 100,000 employees in its branches.
Wells Fargo regularly releases numbers about how many products it sells to customers, a practice it calls “cross-sell.” Its wealth and investment management unit, for example, sold 10.55 products per retail banking household in November 2015, up from 10.49 a year earlier, according to the bank’s annual 10-K financial filing.
In the second quarter, however, the bank changed how it tallies up some of those numbers and said it was considering more changes.
Piper Jaffray analyst Kevin Barker said he does not think the crackdown on Wells Fargo will have much of an impact on others in the industry.
“I think this is unique to Wells Fargo and their particular situation and how hard they push on cross-sell,” he said.
(Reporting By Patrick Rucker in Washington and Dan Freed in New York; Editing by Alan Crosby and Jonathan Oatis)