Wells Fargo agrees to pay $3 billion in fake account scandal

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SAN FRANCISCO – MARCH 20: The Wells Fargo logo is seen on a sign outside of a Wells Fargo Home Mortgage branch office March 20, 2007 in San Francisco, California. San Francisco based Wells Fargo & Co. announced today that it is cutting over 500 jobs in the home mortgage divisions in South Carolina, Arizona and California that cater to high-risk borrowers. (Photo by Justin Sullivan/Getty Images)

CHARLOTTE, N.C. — Wells Fargo has agreed to pay $3 billion to resolve the investigations into their sales practices, which included opening accounts for millions of customers between 2012 and 2016 without their permission.

The company is accused of pressuring employees to meet unrealistic sales goals that led them to create accounts and give products to customers without their consent. The Department of Justice says employees often created false records or misused customers’ identities.

The company admitted that they collected millions of dollars in fees and interest they weren’t entitled to, harmed some customer’s credit ratings, and unlawfully used sensitive personal information.

“This settlement holds Wells Fargo accountable for tolerating fraudulent conduct that is remarkable both for its duration and scope, and for its blatant disregard of customer’s private information. The Civil Division will continue to use all available tools to protect the American public from fraud and abuse, including misconduct by or against their financial institutions,” ” said Deputy Assistant Attorney General Michael D. Granston of the Department of Justice’s Civil Division.

The criminal investigation into Wells Fargo’s activity is being resolved with a deferred prosecution agreement. This means the company will not be prosecuted during the three-year term of the agreement if they abide by all conditions, including cooperating with any further government investigations.

The settlement with the Department of Justice covers Wells Fargo as a company, and the DOJ could still go after individuals for violating bank laws. The Office of the Comptroller of the Currency, one of the nation’s bank regulators, fined several of Wells’ former top executives earlier this year for their role in the scandal.

Wells Fargo also entered a civil settlement agreement for the creation of false bank records. The agreement falls under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and means that the federal government can see civil penalties against the bank.

Wells Fargo also agreed to the SEC instituting a cease-and-desist. The $3 billion payment resolves all three matters and includes a $500 million civil penalty to be distributed to investors.

Before the scandal broke, Wells Fargo was considered to have a sterling reputation among the big banks. The bank referred to its branches as “stores,” and once had a policy of trying to get each Wells Fargo customer to have eight financial products with the company

Wells’ sales policies, pushed by top management, were aggressive and unrealistic. Bank employees were berated for not making bloated sales quotas, which ultimately resulted in many employees gaming Wells Fargo’s sales system in order to meet these artificial sales goals. For example, a number of Wells Fargo customers, notably the elderly, were signed up for online banking when they did not have Internet access.

Former chief executive John G. Stumpf was fined $17.5 million and agreed to a lifetime ban from the banking industry.

The Associated Press contributed to this report.

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