Uh-oh: Ohio’s Fifth Third in big trouble with the Feds

Oh dear, oh dear, oh dear. Ohio politicians have been claiming for years that payday and installment lenders are the problem children of financial services (see Ohio’s 2018 law regulating them). But today, there is news out that makes clear that there’s another financial predator on the scene in our fair state: Ohio-based bank Fifth Third.

Fifth Third Bank on Tuesday said it agreed to pay $20 million in penalties imposed by the Consumer Financial Protection Bureau to settle a CFPB investigation into its auto insurance practices, and a 2020 lawsuit the agency filed pertaining to the bank’s creation of fake customer accounts.

The CFPB said it was imposing penalties on the bank for illegally charging customers for unnecessary auto insurance policies. It estimates the practice harmed more than 35,000 customers and resulted in vehicle repossession for more than 1,000 of them.

“Fifth Third Bank demanded borrowers pay for coverage they did not need or else face delinquency, additional fees and repossessions,” the agency said in a statement. “Fifth Third Bank conducted repossessions of vehicles when the delinquency was caused by the bank charging unnecessary and duplicative coverage.”

The bank, which is based in Cincinnati, Ohio, operates branches in 12 states, primarily in the Midwest and Southeast.

Oops.

The “fake accounts” claim reminds us of another predatory bank scandal, namely that run by Wells Fargo. OK, being more accurate, perhaps we should say scandals.

The vehicle repossession claim reminds us of the practices you often hear about involving dodgy title lenders, especially in the South.

The charging people for unnecessary insurance products reminds us of practices that the supposedly “good” payday/installment lenders got dinged for a few years ago in California.

Of course, we’re always told banks are the good actors because they’re subject to so much federal regulation. I guess to the agency’s credit, the CFPB did actually go after Fifth Third for $20 million here. To the agency’s discredit, it has seemed a lot less interested in focusing on banks (ahem, exempting basically everyone from its “overdraft rule”) than it has others in the space, for example fintechs.