Fifth Third Bank must pay $20 million to resolve litigation in its auto lending practices.
The settlement followed an investigation by the Consumer Financial Protection Bureau, which accused the bank of forcing vehicle insurance onto borrowers who had coverage and setting up fake accounts in the name of its customers, according to a Tuesday (July 9) press release.
In a statement provided to PYMNTS, Cincinnati-based Fifth Third said it agreed to pay a $15 million fine for sales practices and a $5 million fine for auto finance servicing activities. The bank will also work with the CFPB on remediation plans for customers not already remediated for these issues.
“Today’s settlement concludes both the sales practices litigation with the CFPB and its separate investigation into certain auto finance servicing activities related to a collateral protection insurance program that the bank shut down in 2019 before the CFPB began its investigation,” said Fifth Third Chief Legal Officer Susan Zaunbrecher. “We have already taken significant action to address these legacy matters, including identifying issues and taking the initiative to set things right.”
A CFPB investigation found that Fifth Third engaged in illegal repossessions and charged illegal fees via its insurance coverage. Between mid-2011 and the end of 2020, more than half of these policies were charged to borrowers who either “always maintained their own coverage or obtained the requisite coverage within a 30-day timeframe of their prior policy lapsing,” the CFPB press release said.
These borrowers paid more than $12.7 million in fees, per the release. When they canceled their coverage with the bank, Fifth Third applied the refunds to their loan balances.
The CFPB also accused Fifth Third of “punishing borrowers with repossessions,” as these customers’ accounts became delinquent due to the bank charging unnecessary insurance.
The CFPB’s latest action came days after the bureau said it is examining lending practices in the medical field, including credit cards offered at doctors and dentists offices.
The new scrutiny comes as 46% of patients cancel their healthcare appointments because of high costs, according to PYMNTS Intelligence’s “The Embedded Finance Tracker®.” The tracker also found that embedded finance has been gaining traction with providers and patients. Roughly a quarter of healthcare firms said they were considering embedded finance at the time of the survey.
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