Fifth Third Bank Agreed to $15M Fine for Illegal Repossessions and Duplicative Insurance Practices

In July 2024, the Consumer Financial Protection Bureau (CFPB) issued a proposed fine of $20 million against Fifth Third Bank for engaging in illegal repossessions of vehicles and charging unnecessary and duplicative insurance fees. The CFPB then filed suit against Fifth Third Bank. CFPB alleged that it had investigated the bank’s practices, and alleged that Fifth Third harmed thousands of customers, violating both consumer protection laws and principles of fair banking.

The lawsuit highlighted the serious consequences for banks that fail to maintain transparent and ethical lending practices, particularly when such actions disproportionately affect vulnerable consumers.

Both the CFPB and Fifth Third agreed to resolve the lawsuit in a Consent Decree which was filed in and approved by the United States District Court for the Southern District of Ohio. The  District Court approved the Consent Decree and stated, “Fifth Third must pay a civil money penalty of $15 million to the Bureau.”

The District Court further stated “The facts alleged in the Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on the entry of the Order, or in any subsequent civil litigation by or on behalf of the Bureau…”

Essentially, Fifth Third Bank did not contest the facts as alleged in CFPB’s proposed fine.

Background of the Lawsuit

On July 9, 2024, the CFPB released a press statement announcing its proposed fines, shedding light on two major areas of concern regarding Fifth Third Bank’s business practices. First, the bank illegally repossessed vehicles belonging to over 1,000 customers, and second, it subjected around 35,000 customers to a cross-selling strategy that involved charging them for unnecessary insurance coverage. The latter practice, referred to as “cross-selling,” is a business strategy in which companies encourage customers to purchase additional products and services, often without their full consent or understanding. The CFPB found that this strategy, coupled with misleading and illegal charges for redundant insurance policies, caused significant financial harm to Fifth Third’s customers.

CFPB Director Rohit Chopra, in his statement, condemned the bank’s actions and warned that unless immediate corrective actions were taken, further consequences could follow. He emphasized that the bank’s senior executives and board of directors must take responsibility and “clean up these broken business practices.” This reflects the CFPB’s broader efforts to ensure that financial institutions are held accountable for practices that harm consumers.

The Nature of the Violations

The CFPB’s investigation revealed two primary forms of misconduct: improper repossessions as well as the imposition of unnecessary and duplicative insurance coverage on vehicle loan borrowers. The investigation found that from July 2011 to December 2020, Fifth Third Bank imposed insurance policies on its customers who either already had the required coverage or quickly obtained it. The bank failed to cancel these unnecessary policies and charged improper fees to borrowers who were already adequately insured.

In more than 37,000 instances, customers were forced to pay for “forced placed” insurance policies that offered no value to them when they already had insurance coverage on their vehicles. The insurance was either redundant or applied to customers who had already obtained the necessary coverage within the 30-day grace period permitted by their loan agreements. For some borrowers, the insurance was canceled only after a significant delay, and even then, Fifth Third failed to refund the illegal fees. Instead of returning the money to consumers, the bank applied the refunds to the consumers’ outstanding loan balances, further increasing their debt.

The more alarming aspect involved the bank’s use of these fees to justify vehicle repossessions. Fifth Third Bank demanded that borrowers pay for the  “forced placed” insurance coverage under the threat of delinquency, additional fees, and eventual repossession. When the delinquencies arose due to these duplicative charges, Fifth Third proceeded with repossessions, despite the fact that the borrowers’ financial difficulties were directly linked to Fifth Third bank’s own actions.

The CFPB’s Findings and Proposed Order

The CFPB’s proposed order against Fifth Third Bank was comprehensive and addressed both the harm caused to consumers and the systemic issues within the bank’s operations that allowed such practices to continue unchecked. The order included several key provisions aimed at compensating consumers and ensuring that Fifth Third Bank took corrective measures:

1. Redress for Harmed Consumers: Fifth Third Bank is required to pay restitution to approximately 35,000 affected consumers. This will provide much-needed relief to those who were harmed by the bank’s wrongful repossessions and the imposition of unnecessary insurance fees.
2. Prohibition of Sales Goals Leading to Unauthorized Practices: The proposed order also prohibits the bank from setting sales goals for its employees that encourage unethical practices, such as opening unauthorized accounts. This measure is designed to prevent the incentivization of activities that could result in further consumer harm and violations of banking regulations.
3. Fines and Penalties: With the Consent Decree, Fifth Third Bank agreed to a $15 million penalty.

Impact on Consumers

The consequences of Fifth Third Bank’s actions were far-reaching, affecting thousands of borrowers who were not only burdened with illegal fees but also faced the stress and hardship of vehicle repossessions. For many consumers, the unlawful repossession of their vehicles resulted in significant financial and emotional distress, making it even harder to recover from the original loan delinquency.

Many of the affected borrowers were already struggling financially, and the imposition of unnecessary insurance fees exacerbated their financial strain. Additionally, the failure of Fifth Third to refund these fees to borrowers in a timely manner further delayed the potential for financial recovery.

The bank’s actions also undermined consumer trust in financial institutions, particularly in their dealings with low-income or credit-challenged borrowers. For many, the experience of being forced to pay for unnecessary insurance or facing repossession due to an unjustified delinquency left lasting scars. The CFPB’s proposed order, and the associated penalties are an important step in holding Fifth Third accountable, but it also serves as a broader warning to other financial institutions about the importance of maintaining fair practices in lending and insurance sales.

The Role of the CFPB in Consumer Protection

The CFPB’s actions against Fifth Third Bank exemplify the agency’s role in safeguarding consumers from harmful banking practices. Established in the wake of the 2008 financial crisis, the CFPB has been an instrumental in holding financial institutions accountable for unfair, deceptive, or abusive practices. By investigating complaints, monitoring financial products, and issuing orders like the one against Fifth Third, the CFPB ensures that consumers have the protections they need to avoid exploitation.

In this lawsuit, the CFPB’s actions sent a clear message to banks and other financial institutions that unfair practices, particularly those that target vulnerable consumers, will not be tolerated. By requiring Fifth Third to pay restitution and penalties, the CFPB not only addressed past wrongs but also to prevent similar issues from arising in the future.

Conclusion

The Consent Decree agreement of a $15 million fine against Fifth Third Bank highlights the importance of ethical business practices in the financial services industry. It also emphasizes the need for stronger consumer protections, especially for those most vulnerable to exploitation. By holding Fifth Third accountable for its illegal repossessions and deceptive insurance practices, the CFPB is reinforcing the need for fairness, transparency, and consumer rights in banking.

If your vehicle has been illegally repossessed by Fifth Third or any other financial institution, or forced to pay for unnecessary insurance coverage, contact us immediately. At FS CORPS, we specialize in helping clients pursue refunds and other forms of compensation, assisting them in recovering from financial harm caused by these unlawful practices.