Oh No…Another Bank Caught Setting Up Fake Accounts to Improve Their Numbers

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WHAT IF THE BANK THAT you entrusted with your money turned out to be defrauding you? That’s what happened to customers in the Wells Fargo scandal, and now it may have happened again.

The Consumer Financial Protection Bureau has accused Cincinnati-based Fifth Third Bank of opening fake accounts, transferring money into new accounts and enrolling customers in services they did not sign up for.

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These allegations are similar to ones filed against Wells Fargo, which was ordered by federal authorities in February 2020 to pay another $3 billion for fake bank accounts and credit card accounts it created between 2002 and 2016. The bank admitted to creating fake bank records, wrongfully collecting millions of dollars in interest and fees, misusing consumer data and affecting customers’ credit ratings. The bank also was fined for abuses in its mortgage and auto lending businesses.

Fifth Third committed similar transgressions by opening bank and credit card accounts without the consent of consumers and activating lines of credit on their accounts, the CFPB, a government consumer watchdog organization, alleges in its lawsuit filed in federal district court in the Northern District of Illinois.

Similar to the Wells Fargo scandal, Fifth Third allegedly used a strategy of “cross-selling” to existing customers by adding various products without their permission to meet sales goals and improve profit margins since 2008.

In a statement issued earlier this month, Fifth Third denied that employees were rewarded for opening unauthorized accounts and said the bank itself had found that unauthorized activity totaled 0.01% of accounts opened between 2010 and 2016, involving $30,000 that already had been returned to customers.

“While even a single unauthorized account is one too many, we took appropriate and decisive action to address each situation,” said Susan Zaunbrecher, Fifth Third’s chief legal officer.[ 

How Fake Accounts Can Hurt You

Fake accounts created by banks to garner more profits can have a large impact on consumers, especially those who were unaware or had fees assessed to their accounts. Consumers can lose both the principal amount of money and the interest earned.

Not having adequate money in an account can lead to paying bills late and lowering your credit score.

“Fees that chip away at your deposits until you have nothing left can lead to accounts being shut down and negative reporting to your ChexSystems record, which is like a credit bureau for checks,” says Bruce McClary, vice president of marketing for the National Foundation for Credit Counseling, a Washington-based nonprofit organization.

Fake bank accounts can lower your credit score because 10% of your score comes from new credit, and 30% comes from amounts owed. Another 35% comes from your payment history, such as paying your bills on time.

“If an account is opened in your name, like a credit card, and it is charged to the max and then not paid for two to three months, it would trigger these three areas and dent your score significantly,” says Alan LeFort, vice president of consumer strategy and cloud segment for online security company McAfee. “That could be the difference in qualifying for a loan.”

Straightening out the fraud can also cost you in time, especially since calls usually need to be conducted during regular business hours.[ 

How to Guard Against Fake Accounts

Consumers should monitor their accounts online frequently by watching their checking and savings account balances.

Look at the fees being charged to your account to see if the amounts have risen. If you encounter a fraudulent account opened in your name or a new fee being charged, keep a record for documentation, such as printing it out or taking a screenshot.

When a bank is the subject of allegations, current account holders should “redouble their efforts to make sure they’re aware of account activity,” says Mark Hamrick, senior economic analyst for Bankrate, a financial data company.

“The reality is even without such a consciousness-raising event, this is something we ought to be doing on an ongoing basis anyway, checking to see whether anything potentially fraudulent has occurred involving our money,” he says.

Most banks have mobile apps where you can check your balance, and they provide email or text alerts telling you immediately when any transaction occurs in your bank accounts and credit cards.

What Is a Cash Management Account?

Consider the pros and cons of keeping all of your money in single nonbank account.

What Should You Do if Your Bank Violated Your Trust?

Consumers who are victims of fraud should contact their bank to get their money back, making sure they have documentation, and report the fraud to law enforcement.

Wells Fargo customers received money from various restitution programs.

If your bank is not cooperative or is taking too long, contact your state attorney general’s office. Account holders could also file a complaint with the CFPB and the Office of the Comptroller of the Currency, which is part of the U.S. Department of the Treasury and oversees banks.[ 

Can You Trust Your Bank Again?

If your bank resolves the situation quickly, explains how the fraud occurred and what the bank is doing to prevent it from happening again, you could consider keeping your money with that institution.

But switching to another bank may be your best bet for peace of mind if you don’t trust that the bank won’t commit fraud again.

Whether you open a new account or not, it is always good practice to keep a close eye on your bank account and credit report, LeFort says. Staying vigilant means when your personal data are compromised, you are aware immediately so you can address any red flags before serious damage is done, he says.

“The best way to keep your personal information safe is by keeping it to yourself,” he says.

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