Fifth Third Enters into Settlement Agreement with CFPB

Rhea-AI Summary

Fifth Third Bank has reached a settlement with the Consumer Financial Protection Bureau (CFPB) to resolve litigation and investigations related to its sales practices and auto finance servicing activities. The Bank will pay $15 million for sales practices and $5 million for auto finance servicing violations. The settlement requires Fifth Third to maintain current policies, develop compliance plans, and work with the CFPB to implement remediation plans for affected customers. The issues addressed in the settlement pertain to accounts opened between 2010 and 2016 and an auto insurance program discontinued in 2019. Fifth Third aims to focus on long-term value creation following the resolution of these matters.

Positive

• Resolved litigation and investigations related to sales practices and auto finance servicing.
• Settlement involves a total payment of $20 million, which provides financial clarity moving forward.
• Requirement to maintain and develop compliance plans may improve operational standards.
• Focus can now shift towards long-term value creation for shareholders and customers.

Negative

• Payment of $20 million in fines could impact short-term financials.
• Historical issues related to sales practices and auto finance activities may affect reputation.

Insights

Legal Expert

Legal Implications: The settlement between Fifth Third Bank and the Consumer Financial Protection Bureau (CFPB) brings significant legal ramifications. By agreeing to pay $15 million for sales practices and $5 million for auto finance servicing activities, the bank acknowledges the issues while avoiding a prolonged legal battle. Settlements like these often include stipulations for future compliance and corrective measures.

This case involved both disputed sales practices and an auto collateral protection insurance program, which the bank had already stopped in 2019. While the settlement resolves past issues, it places an ongoing compliance burden on Fifth Third, requiring them to develop and maintain comprehensive compliance plans. Investors should note that these measures could incur additional costs, impacting short-term financials.

Legally, this settlement also serves as a precedent for how future financial institutions might negotiate with regulatory bodies. By settling, Fifth Third avoids the uncertainties of litigation, which can be costly and disruptive, but must now operate under closer regulatory scrutiny.

Financial Analyst

Financial Impact: The immediate financial impact of this settlement is the payment of $20 million in fines. This amount is relatively modest for an institution of Fifth Third's size, thus unlikely to significantly affect the bank's financial stability or profitability. However, the cost goes beyond the fines. Compliance and remediation efforts entail ongoing expenses, which will need to be factored into future financial projections.

From a financial perspective, resolving these legal issues allows Fifth Third to focus on core banking operations without the overhang of regulatory investigations. This could improve investor sentiment and potentially had a positive impact on the bank's stock price in the short-term. In the long-term, strict adherence to compliance protocols can prevent similar issues, reducing the risk of future fines and legal costs.

Investors should monitor how these compliance measures are integrated into the bank's operations and their overall effectiveness in mitigating risk.

 

CINCINNATI--(BUSINESS WIRE)-- Fifth Third Bank announced today it has reached a comprehensive settlement agreement with the Consumer Financial Protection Bureau (CFPB) to resolve both its litigation related to sales practices and an investigation into the Bank’s auto finance servicing activities. Fifth Third has agreed to pay a $15 million fine for sales practices and a $5 million fine for auto finance servicing activities. This agreement requires Fifth Third to maintain existing policies and develop compliance plans. The Bank will also work with the Bureau’s supervisory arm to develop and implement remediation plans for any customers whom the Bank has not already remediated for these issues. The settlement resolves disputed sales practices issues related to a limited number of accounts opened beginning in 2010 and ending in 2016. The settlement also addresses the CFPB’s concerns about an auto collateral protection insurance program that Fifth Third voluntarily discontinued in January 2019.

“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 Susan Zaunbrecher, chief legal officer of Fifth Third. “We have already taken significant action to address these legacy matters, including identifying issues and taking the initiative to set things right. We consistently put our customers at the center of everything we do. We are pleased to put these historical matters behind us so we can continue to focus on creating sustainable long-term value for our shareholders, customers, employees and in our communities.”

About Fifth Third

Fifth Third is a bank that’s as long on innovation as it is on history. Since 1858, we’ve been helping individuals, families, businesses and communities grow through smart financial services that improve lives. Our list of firsts is extensive, and it’s one that continues to expand as we explore the intersection of tech-driven innovation, dedicated people and focused community impact. Fifth Third is one of the few U.S.-based banks to have been named among Ethisphere’s World’s Most Ethical Companies® for several years. With a commitment to taking care of our customers, employees, communities and shareholders, our goal is not only to be the nation’s highest performing regional bank, but to be the bank people most value and trust.

Fifth Third Bank, National Association, is a federally chartered institution. Fifth Third Bancorp is the indirect parent company of Fifth Third Bank, and its common stock is traded on the NASDAQ® Global Select Market under the symbol "FITB." Investor information and press releases can be viewed at www.53.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240709360289/en/

Jennifer Hendricks Sullivan (Media Relations)

jennifer.hendricks.sullivan@53.com | 614-744-7693

Matt Curoe (Investor Relations)

Matthew.Curoe@53.com | 513-534-2345

Source: Fifth Third Bank

FAQ

What settlement has Fifth Third Bank reached with the CFPB?

Fifth Third Bank has agreed to a settlement with the CFPB involving a total payment of $20 million to resolve issues related to sales practices and auto finance servicing.

How much is Fifth Third Bank paying in fines according to the settlement?

Fifth Third Bank is paying $15 million for sales practices violations and $5 million for auto finance servicing activities, totaling $20 million.

What period do the sales practices issues in the Fifth Third settlement cover?

The sales practices issues addressed in the settlement cover accounts opened from 2010 to 2016.

What action has Fifth Third Bank taken regarding its auto finance servicing practices?

Fifth Third Bank discontinued its auto collateral protection insurance program in January 2019, prior to the CFPB's investigation.

How is Fifth Third Bank addressing customer remediation as part of the settlement?

Fifth Third Bank will work with the CFPB to develop and implement remediation plans for any affected customers.