U.S. Bank Fined $37.5 Million for Illegally Accessing Customer Data and Opening New Accounts

Talk about overstepping. 

As a consumer, it's important to have a good relationship with your bank. That means feeling comfortable with the service you receive and knowing that you've put your money in the right place. 

But if you're a customer of U.S. Bank, it may be time to think about opening a checking or savings account elsewhere. U.S. Bank was just the recipient of a whopping fine for exploiting customer data and opening accounts that were never authorized. And that's not a comforting thought at all.

When banks break the rules

The Consumer Financial Protection Bureau (CFPB) has fined U.S. Bank $37.5 million for illegally accessing its customers' credit reports and opening different types of accounts for them without permission, including credit cards, lines of credit, savings accounts, and checking accounts. 

U.S. Bank has long tried to incentivize its employees to upsell existing customers on different products. But some employees clearly took that concept way too far. Now, any customer that was impacted by those actions will be entitled to a settlement from the bank. 

“For over a decade, U.S. Bank knew its employees were taking advantage of its customers by misappropriating consumer data to create fictitious accounts,” said CFPD Director Rohit Chopra in a press release.

U.S. Bank is actually the fifth largest bank in the country. It operates over 2,800 physical branches and holds more than $559 billion in assets. 

After a lengthy investigation, the CFPB found that U.S. Bank was aware that sales pressure was causing employees to open accounts on customers' behalf without permission. In fact, U.S. Bank actually provided financial incentives for employees to aggressively open accounts -- but at the expense of unsuspecting customers.

How the rules were officially broken

It's common practice to access a customer's credit report in the course of a loan application. But customers need to consent to that first. U.S. Bank accessed credit reports without asking, and that's a big no-no, as it violates the Fair Credit Reporting Act.

U.S. Bank also opened new accounts without getting permission from customers first. That's a clear violation of the Consumer Financial Protection Act and the Truth in Lending Act.

Finally, U.S. Bank failed to provide legally required disclosures to customers in the course of opening new deposit accounts. That goes against the Truth in Savings Act.

The settlement is “related to legacy sales practices involving a small percentage of accounts dating back to 2010,” U.S. Bank said in a statement Saturday. ‘We are pleased to put this matter behind us.”

All told, it's clear that U.S. Bank broke the rules in a very serious way. And now, it has to pay. 

But it's not just a monetary fine the bank is facing. U.S. Bank will also no doubt have to work very hard to overcome the damage to its reputation that's apt to ensue following this news.

The $37.5 million penalty to the CFPD will be deposited into the CFPD’s victims relief fund, which “provides compensation to consumers harmed by violations of federal consumer financial protection law. U.S. Bank is responsible for returning all unlawfully charged fees and costs, plus interest.

If you're a U.S. Bank customer, it may be time to reconsider that relationship or, at the very least, take a look at your accounts and make sure they're all authorized. But U.S. Bank isn't the first major institution to bend the rules, and it surely won't be the last. So it pays to keep tabs on your bank and see if it lands in the news due to unscrupulous practices. If so, that's reason enough to consider banking elsewhere.