Wells Fargo To Pay $50 Million To L.A. City, County For Allegedly Opening Fake Accounts In Customers' Names

LOS ANGELES COUNTY, CA – Wells Fargo will pay $50 million in penalties to the city and county of Los Angeles, and restitution to customers, as part of a settlement resolving litigation alleging the company opened up bank accounts without customers' permission, it was announced today.

Los Angeles City Attorney Mike Feuer said the settlement -- which includes a requirement that Wells Fargo set up a system for customers to claim restitution -- is on top of at least $135 million in penalties that the bank has also agreed to pay to two federal agencies over similar allegations.

The settlement stems from a lawsuit Feuer's office filed against Wells Fargo last May after the Los Angeles Times reported that fake accounts were created without customers' knowledge and caused them to rack up bank fees.

The $50 million in civil penalties under the settlement -- the largest his office has ever secured -- will go toward efforts to protect consumers, Feuer said.

Councilman Paul Krekorian said today he plans to bring a motion calling for the city's $25 million share of the settlement to be used to increase the number of attorneys working in the consumer protection division of the City Attorney's Office.

The council recently budgeted about $5.8 million to fund such a division in Feuer's office.

Feuer called the settlement "a major victory for consumers."

"We're holding Wells Fargo accountable and assuring the violations we've alleged never happen in the future," he said. "This extraordinary resolution sends a strong message -- to big banks and consumers alike -- that we'll be vigilant in protecting consumer rights."

Wells Fargo said the agreements were made with its customers in mind and out of a desire to show accountability.

"Wells Fargo is committed to putting our customers' interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request," the company's prepared statement says.

"Our entire culture is centered on doing what is right for our customers. However, at Wells Fargo, when we make mistakes, we are open about it, we take responsibility and we take action. Today's agreements are consistent with these beliefs."

The Consumer Financial Protection Bureau, one of the federal agencies that also reached a settlement with Wells Fargo, alleged that the bank opened hundreds of thousands of deposit and tens of thousands of credit card accounts without their customers' knowledge or permission.

The fake accounts were set up by bank employees to achieve sales goals and reap financial incentive rewards, and the bank fired about 5,300 employees as the result of the allegations, according to the CFPB.

The CFPB's settlement requires Wells Fargo to pay $100 million in penalties, while the other federal agency, the Office of the Comptroller of the Currency, has secured a settlement requiring the bank to pay $35 million in penalties.

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