Wells Fargo has been fined $185million (£139million), and has fired 5,300 employees for committing pervasive fraud from 2011.
The scandal saw employees open credit cards on customers’ accounts without consent. Employees then moved funds from customers' existing accounts into newly-created ones without their knowledge or consent, and forced customers to accumulate late fees, according to regulators.
Customers then faced charges for insufficient funds or overdraft fees as their original accounts did not have enough money. The investigation by the Consumer Financial Protection Bureau said this practice was "widespread," – CNN reports.
They also created fake emails and pin numbers to sign up unaware customers to online banking services. In total, Wells opened 1.5 million bank accounts and applied for 565,000 credit cards unbeknown to their customers.
The fake accounts earned the bank unwarranted fees, allowing employees to boost sales figures, and receive higher bonuses.
In a memo to employees on Thursday, the bank said: "At Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action.”
Wells faces the largest penalty since the CFPB was founded in 2011. The bank has confirmed it will pay $185million in fines, and an additional $5million to refund customers – a total of £142.85million.
A breakdown of the fines will see $100million (£75million) go to the CFPB's Civil Penalty Fund, $35million (£26million) to the Office of the Comptroller of the Currency, and another $50million (£37million) will be paid to the City and County of Los Angeles.
Richard Cordray, Director of the Consumer Financial Protection Bureau, said in a statement: "Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,” – CNN reports.
"We regret and take responsibility for any instances where customers may have received a product that they did not request," Wells Fargo said in a statement.
According to the New York Times, regulators said that employees were motivated to open the unauthorised accounts due to compensation policies that rewarded them for drumming up new business.
Many current and former Wells employees told regulators they felt extreme pressure to grow the number of new accounts.
“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.
He added: “Unchecked incentives can lead to serious consumer harm, and that is what happened here."
Recently, HR Grapevine covered the removal of bonuses at Woodford Investment Management due to them being largely ineffective and leading to problems in the finance sector.
What do you think - should bonuses in the finance sector be scrapped? Tell us in the comments…
Hank V