The Consumerist: Complaints About Student Loan Servicing Increased 429% In Past Year

Complaints About Student Loan Servicing Increased 429% In Past Year

In the past year, federal regulators and consumer advocates have highlighted issues with student loans and the servicing of these often crippling debts: from finding that educational loans continue to haunt older borrowers, to suing Navient, the largest student loan servicing company. Because of this, it might not come as much of a surprise that the number of complaints the Consumer Financial Protection Bureau received related to student loans has skyrocketed. 

Today, the Bureau released its monthly complaint snapshot [PDF], which shows a 429% increase in student loan complaints received in a year-to-year comparison of just three months.

According to the report, the CFPB received 2,913 complaints from Dec. 2016 to Feb. 2017, a significant increase from the 551 complaints written between Dec. 2015 to Feb. 2016.

The CFPB notes that the surge in complaints is likely tied not only to an increased awareness of student loan servicing issues, but the fact that the Bureau updated its intake form on accepting complaints in Feb. 2016.

Additionally, the Bureau believes that taking “major enforcement action” against a student loan servicer contributed to a student loan complaint volume spike in Jan. 2017.

The CFPB doesn’t explicitly name the company, but the Bureau — along with two states — sued Navient, alleging the company cheated borrowers out of repayment rights.

While the CFPB didn’t provide specific complaint volume for that time, the snapshot shows that Navient was the tenth most complained about company from Oct. 2016 to Dec. 2016, receiving an average of 236 complaints each month.

When the complaints are compared to the same three-month period in Oct. 2015 to Dec. 2015, the CFPB found a 52% increase. In all, the Bureau says it received 10,637 student loans-related complaints for all of 2016.

Rohit Chopra, senior fellow at the Consumer Federation of America, is a former assistant director and student loan ombudsman for the CFPB. He tell Consumerist that Bureau’s snapshot is just the latest finding in a loan line of data point that show signs of big trouble in the broken student loan market.

“The agency’s lawsuit against Navient was a wake-up call to many borrowers that they too may have been preyed upon by the company’s illegal conduct,” he says of the increases, adding that borrowers may also be filing more complaints with the CFPB because companies are more likely to provide an in-writing response through this portal.

Suzanne Martindale, staff attorney for Consumer Union, tells Consumerist that the CPFB’s report provides just another reason why a strong consumer watchdog is needed.

“If anything, this increase shows that there’s a real problem out there – and that consumers increasingly rely on the CFPB to stand up for them,” she said, noting that CFPB provides an outlet for people who would otherwise suffer in silence when financial companies mistreat them.

Other Highlights

The CFPB’s monthly snapshot of complaints also highlighted issues with credit card companies and a national complaint overview.

As of March 1, 2017, the Bureau says it has handled approximately 116,200 credit card complaints, many involving issues related to being billed for fraudulent charges, confusion over reward programs, and being the victims of identity theft.

Of the complaints the CFPB received, the most involved Citibank, Capital One, and JPMorgan Chase. These companies received about 90% of all credit card complaints received by the Bureau from Oct. 2016 to Dec. 2016.

Wells Fargo received the greatest increase credit card complaints — about 99% — when comparing consumer gripes between Oct. 2015 and Dec. 2015 to those received between Oct. 2016 to Dec. 2016.

While the CFPB doesn’t mention it, the increased complaints came immediately after Wells Fargo’s fake account fiasco was uncovered.

In Sept. 2016, the CFPB — along with the Office of the Comptroller of the Currency and the Los Angeles city attorney — ordered the bank to pay $185 million in refunds and penalties after finding that employees opened nearly two million unauthorized consumers accounts in order meet high-pressure sales quotas.

While student loans and credit card companies accounted for many complaints received by the CFPB, it was actually debt collection that was the most-complained about financial product or service.

Of the approximately 26,000 complaints handled in February, there were 7,755 complaints about debt collection.

The second most-complained-about consumer product was credit reporting — accounting for 4,902 complaints — followed by mortgages, which accounted for 3,718 complaints.

NewYorkTimes: How ‘Consumer Relief’ after Mortgage Crisis can Enrich Big Banks

“Resecuritization”

the basic thrust of the defense is to point out what is absent rather than attack what is not absent.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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As predicted on my blog back in 2008, we are seeing new names of Trusts emerge in foreclosure cases — involving old loans that were declared in default years ago by parties asserting they represent the alleged servicer of either a named bank or servicer or an old trust. What happened? As our sources had revealed, the alleged trusts had nothing in them and were the source of extreme liability of the Master Servicer acting as underwriter to the investors and third parties who traded in securities based upon the representation that the Trust actually owned the debts of millions of homeowners.
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We have not seen the agreements, but we are told, and our analysis confirms, that the old trusts were “retired” and that new trusts, also empty, are now being used wherein the paperwork for the new “Trusts” is far more complete than what we have previously seen.
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As far as we have determined thus far the mechanics of the change of trust name are along the following lines:
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  1. There is probably a purchase and sale agreement between the old trust and the new trust. Like previous documentation there are no warranties of ownership but ownership of the debts is implied.
  2. Like the old Trusts, foreclosures are brought in the name of the new trusts, using US Bank or other major institution as the “Trustee.”
  3. Investors in the old trusts are given certificates in the new trust as settlement of claims brought by investors for malfeasance in the handling of their money — namely the origination of loans instead of the acquisition of loans and the granting of loans that were far lower in quality than agreed and far higher risks than allowed for stable managed funds.
  4. This “resecuritization” process is a sham just like the original old trust. But it follows the playbook the banks have been using for over a decade. By adding another level of paper to fabricated documents based upon nonexistent transactions, it promotes the illusion of valid transactions and valid documents.
  5. Like all other trusts and hybrid situations in which trusts were involved but not named, the entire scheme is based upon a simple premise. The banks have managed information and data such that there remains a false sense of security that they are still credible sources of information — despite all evidence to the contrary. The additional layer of documents then adds to the illusion because it is counterintuitive to believe that these high level complex documents represent transactions in the real world that don’t exist.
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Defense strategies remain the same, however. The issues in evidence laws and rules are foundation, and hearsay.The basic defects in the bank’s credibility must be revealed even if it does not get to the point where everything is revealed. The rent-a-name practice for appointment of trustees that have no obligations or duties continues. The “apparent authority” of the servicers is based upon a trust document of an entity in which there is no asset. But the website of US Bank and others suggest that they have business records — which in actuality do not exist. Hence, the basic thrust of the defense is to point out what is absent rather than attack what is not absent.
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This takes strict logical analysis by the attorney representing the homeowner — an exercise that in most cases cannot be accomplished by a pro se litigant. It may be beyond the confidence of the lawyer too, but there are many people in the country who provide services that assist with the logical analysis and factual analysis — including but not limited to the team at LivingLies and LendingLies. The analyst should be well-steeped in the three classes of securitization — concept, written documents and actual practice in order to come to conclusions that are not only correct but are likely to give traction in court.
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While tempting, attacking the existing documentation on the basis of authenticity or validity is a rabbit hole. The only parties that actually have the proof as to the fabrication of any one particular transaction are the parties with whom you are in litigation and the parties who created them and use them as sham conduits. They resist by all means available any attempt to provide access tot he real information and the real monetary transactions which look very different from the ones portrayed in court.
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By making an allegation you are now required to prove what you have said by evidence that the other side simply will not give up. This is not to say that there is no value in sending a QWR (Qualified Written Request), (DVL) Debt Validation Letter, or a complaint to the state AG or the CFPB. Much of the inconsistent statements come from those responses and can be used in court. And there is also considerable value in seeking discovery even if we know that in most cases, while it should be allowed, the judge will issue protective orders or sustain objections to requests seeking the identity of the owner of the debt.
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The value of those apparently futile endeavors can be that at trial the foreclosing party will almost certainly rely on legal presumptions that depend upon information contained in your discovery request.
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OBJECTIONS AT TRIAL: This requires research and analysis of potential objections and how they should be used. While a motion in limine before trial would seem to be the better practice, the real traction seems to come at trial when the homeowner raises objections and moves to exclude evidence that relies upon data contained in discovery they refused to answer and which the court ruled was irrelevant. It is of utmost importance, however, that in order to use the discovery exchanges, you must file a motion to compel and set it for hearing and get it heard. The risk of a motion in limine is that the court is more likely to deny it and then when raised at trial in an objection will regard your objection as a second bite an apple that has already been the subject of a dispositive ruling.
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Cross examination of the robo-witness should be aggressive and relentless pointing to the actual lack of knowledge of the witness about anything other than the script from which he was trained to testify.

RESCISSION: It’s time for another slap on the wrist for state and federal judges.

50 years ago Congress decided to slap punitive measures on lenders who ignore or attempt to go around (table-funded loans) existing laws on required disclosures — instead of creating a super agency that would review every loan closing before it could be consummated. So it made the punishment so severe that only the stupidest lenders would attempt to violate Federal law. That worked for a while — until the era of securitization fail. (Adam Levitin’s term for illusion under the cloak of false securitization).

Draconian consequences happen when the “lender” violates these laws. They lose the loan, the debt (or part of it), their paper is worthless and the disgorgement of all money ever paid by borrower or received by anyone arising out of the origination of the loan.

But Judges have resisted following the law, leaving the “lenders” with the bounty of ill-gotten gains and no punishment because judges refuse to do it —even after they received a slap on their wrists by the unanimous SCOTUS decision in Jesinoski. Now they will be getting another slap — and it might not be just on the wrists, considering the sarcasm with which Scalia penned the Jesinoski opinion.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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TILA rescission is mainly a procedural statute under 15 USC §1635. Like Scalia said in the Jesinoski case it specifically states WHEN things happen. It also makes clear, just as the unanimous court in Jesinoski made clear that no further action was required — especially the incorrect decisions in thousands of cases where the judge said that the rescission under TILA is NOT effective until the borrower files a lawsuit. What is clear from the statute and the regulations and the SCOTUS decision is that rescission is effective on the date of notice, which is the date of mailing if the borrower uses US Mail.

There are several defenses that might seem likely to succeed but those defenses (1) must be filed by a creditor (the note and mortgage are void instruments the moment that rescission notice is sent) (2) hence the grounds for objection are not “defenses” but rather potential grounds to vacate a lawful instrument that has already taken effect. Whether the right to have sent the notice had expired, or whether the right to rescind the putative loan is not well-grounded because of other restrictions (e.g. purchase money mortgage) are all POTENTIAL grounds to vacate the rescission — as long as the suit to vacate the rescission is brought by a party with legal standing.

A party does not have legal standing if their only claim to standing is that they once held a note and mortgage that are now void. {NOTE: No party has ever filed an action to vacate the rescission because (1) they have chosen to ignore the rescission for more than 20 days and thus subject to the defense of statute of limitations to their petition to vacate and (2) they would be required to state the rescission was effective in order to get relief and (3) there is a very high probability that there is no formal creditor that was secured by the mortgage encumbrance of record. The latter point about no formal creditor would also mean that the apparent challenge to the rescission based upon the “purchase money mortgage” “exception” would fail.}

The premise to this discussion is that the so-called originator was not the source of funds. This in my opinion means that there never was consummation — despite all appearances to the contrary.

The borrower was induced to sign a note and mortgage settlement statements and acknowledgement of disclosures and right to rescind under the false premise that the originator was the lender, as stated on the note and mortgage.

The resulting execution of documents thus produced the following results: (1) the putative borrower has signed the “closing documents” and (2) the originator neither signs those documents nor lends any money. This results in an executory contract without consideration which means an unenforceable partially completed documentary trail that creates the illusion of a normal residential loan closing.

TILA Rescission is effective at the time that the borrowers notify any one of the players who represent themselves as being servicer, lender, assignee or holder. The effect of rescission is to cancel the loan contract and that in turn makes the note and mortgage void, not voidable. That the note and mortgage become void is expressly set forth in the authorized regulations (Reg Z) promulgated by the Federal Reserve and now the Consumer Financial Protection Board (CFPB). There is no lawsuit that is required or even possible for the putative borrower to file — i.e., there is no present controversy because the loan “contract” to the extent it exists has already been canceled and the note and mortgage have already been rendered void.

Citi Plan to Force foreclosures Exposed and Fined $29 Million

This is one instance in which the industry practice of tricking borrowers into foreclosure becomes crystal clear. The case is also instructive on the terms of so-called “modifications.” The goal in all instances is to use every means at their disposal to trick the borrower into waiving rights and falling into the abyss of foreclosure without any appropriate disclosures.

these self-proclaimed “servicers” are not acting on behalf of any real creditor whose money was converted to a fraudulent scheme; instead they are creating a void by not revealing the creditor and then stepping into that void declaring themselves to be creditors or to be entitled to being treated like creditors.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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See 201701_cfpb_citifinancial-consent-order

See http://www.housingwire.com/articles/39012-cfpb-fines-citifinancial-servicing-and-citimortgage-29-million

“We are not in the modification business. we are in the foreclosure business.” So said the manager of the “loss mitigation” department of Bank of America in Massachusetts a few years back, already reported on this blog.

So it should come as no surprise that Citi granted “deferments” that accrued until the deferment period was over rather than tacking it on to the end of an obligation (that they had interest in anyway).

Citi SAID they would extend the “payback” period (term of the loan) but they didn’t, leaving the people who received deferments in the untenable position of suddenly coming up with a whopping sum of money that they thought was due at the end of their loan — not at the end of the deferment period. So the whole reason for offering the deferments was  (1) to get the “borrowers” to waive their rights and (2) to be assured that the foreclosure would happen without defenses being raised.

As always we are talking about the new normal — where super banks don’t look for workouts that will improve their chances of getting paid on a loan. Instead they are looking for way to diminish the payback, depress market values and score big on foreclosures that put a presumptive cap on their illicit activities preceding the foreclosures.

The banks made their money long before the foreclosure and don’t care what actually happens to the property — except that they welcome the false “recovery” of “servicer advances” in which they paid investors from a dynamic dark pool consisting entirely of investor money.

In other words these self-proclaimed “servicers” are not acting on behalf of any real creditor whose money was converted to a fraudulent scheme; instead they are creating a void by not revealing the creditor and then stepping into that void declaring themselves to be creditors or to be entitled to being treated like creditors.

  1. For borrowers who received a Special Deferment (and therefore did not prepay any interest), the interest accruing during the Deferment period became due immediately upon a borrower’s next scheduled payment, rather than at the end of the borrower’s loan term.
  2. Respondent sent borrowers who applied for Deferments in certain states an authorization form informing them that “the repayment term of the loan will be extended.” Respondent sent all borrowers who it approved for a Deferment a confirmation letter with similar disclosures.

2017-CFPB-0004 Document 1 Filed 01/23/2017 Page 8 of 31

  1. In its communications to borrowers, Respondent disclosed that “interest will continue to accrue” during the Deferment period, but Respondent did not disclose the amount of interest that would accrue during the Deferment period, when that interest would be due, or how a borrower’s next payment would be applied in relation to that accrued interest. Respondent also failed to disclose that a Special Deferment would significantly reduce the amount of principal reduction borrowers would achieve once they resumed making loan payments, resulting in borrowers paying more interest over the life of the loan. [e.s.]

The True Lender Issue May Be An Open Door Now

THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.

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In an article published by Morgan, Lewis & Bockius LLP, it appears that the evasive true lender argument received new life in an ancillary proceeding before a Federal District Judge in California. By holding that a tribal bank originating loans for a non-bank lender was not a “true lender.” The effects on foreclosure litigation are obvious. Most loans were originated by parties acting not as banks but as sales organizations or mortgage brokers. The money came from an entity created to mask the fact that the funding for the loan came from a dark pool of investor money instead of either a bank lender or a non bank lender. Hence the “table-funded” lender was not a lender any more than the originator.

In this case the finding of the court means that usury laws apply which might be something to look at especially in adjustable rate mortgage loan papers executed in favor of a non-lender who was acting on behalf of a non-lender and certainly nobody in the alleged chain was acting in its capacity as a bank lender unless they actually made the loan. remedies for usury law violations range widely among the states. In some, the remedy is loss of the debt and three times the debt in statutory damages.

The most important part of this decision as I see it is that if a party has no risk or money in the loan, then it is not a lender.

The ultimate effect of this decision might well bring down the foreclosure marketplace. If the originator and the party behind the curtain were not bank lenders, then they might not be lenders at all. Hence transfers from parties who were neither bank lenders nor nonbank lenders might have stumbled into the ultimate argument that the loan contract was never consummated.

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments. Or call 202-838-6345

California Court Weighs in on “True Lender” Issue as CFPB Expands its UDAAP Enforcement Authority

Thursday, September 8, 2016

In a significant decision, on August 31, the US District Court for the Central District of California held that a tribal bank originating loans for a non-bank lender was not the “true lender”—making the loans subject to state usury limits.

Background

In December 2013, the Consumer Financial Protection Bureau (CFPB) commenced litigation against CashCall (a payday lender in a partnership with a tribal bank) and other defendants, claiming that they had violated the federal law prohibition on unfair, deceptive, or abusive acts or practices (UDAAP) for financial services providers by servicing and collecting on loans that were wholly or partially void or uncollectible under state law.

The CFPB alleged that

  • CashCall (a non-bank payday lender) and not the tribal bank that partnered with CashCall was the “true lender” because only CashCall had money at risk;
  • there was no reasonable basis for the choice of tribal law as the governing law for the loan contract and, therefore, in the absence of an effective contractual choice-of-law provision, the law of the borrower’s state governed the contracts;
  • because the loan contracts charged interest rates in excess of the usury limits in the sixteen states identified by the CFPB, the contracts were wholly or partially void and/or uncollectible under applicable state law in those states;
  • therefore, by collecting on the loan contracts and attempting to collect on the same, CashCall’s actions were deceptive and violated the federal UDAAP statute.

The court granted the CFPB’s motion for partial summary judgment on all four elements of its liability theory.

This case is the latest in a number of cases brought against CashCall that have raised “true lender” questions and have caused uncertainty for marketplace lending and other non-bank lenders that use a bank partnership model for the origination of consumer loans. However, the court’s decision is particularly significant for a number of reasons, most notably the following:

  • The CFPB’s argument that a state law violation can be a predicate for a federal UDAAP violation represents a significant potential expansion of the agency’s authority. As the court noted, state law violations have been used, with some limitations, as predicates for finding deceptive practices violations of the Fair Debt Collection Practices Act’s prohibitions against misrepresenting the “legal status” (that is, the collectability) of a debt, which often depends on state law, but this appears to be the first significant application of that theory to the general Dodd-Frank Act UDAAP prohibition.
  • In deciding the “true lender” issue, the court essentially adopts the holding in CashCall, Inc. v. Morrisey, 2014 WL 2404300 (W.Va. May 30, 2014), a West Virginia state law case, holding that the proper test for determining the “true lender” is the “predominant economic interest” of the parties. Varying slightly from Morrisey, the court finds that the “key and most determinative factor” is whether the bank “placed its own money at risk at any time during the transactions, or whether the entire money burden and risk of the loan program was borne by CashCall.” Therefore, although the court uses the term predominant economic interest, the court’s holding could be read to establish that the bank does not have to have more economic interest in the transaction than the non-bank partner. Rather, the bank would be found to be a “true lender” if the bank has any of its own funds at risk for any period of time.
  • The court dismisses without comment the holdings in other federal cases that looked to the contractual relationships between the parties to determine the “true lender,” such as Sawyer v. Bill Me Later, Inc., 23 F. Supp. 3d 1359 (D. Utah 2014).
  • Typically, “true lender” issues are raised by private litigants or state regulatory authorities tasked with enforcing state law. In this case, the CFPB, a federal agency that has no apparent authority to enforce state law, has used state law as a predicate for a federal law violation.
  • According to the court, CashCall relied on the advice of counsel that the tribal bank partnership did not require CashCall to obtain state lending licenses or subject the loans to state laws. However, reliance on counsel did not absolve CashCall—or its CEO and owner—from liability for the UDAAP statute and other violations.

Key Takeaways

The combination of using state law as a predicate for a UDAAP violation and rejection of the advice of counsel defense makes this decision noteworthy. The legal theory implicit in the CFPB’s approach is that, in attempting to collect a debt, a creditor makes an implied representation that that debt is enforceable or, conversely, a material omission that the debt is unenforceable. In rejecting the advice of counsel defense, the CFPB successfully took the position that the objective falsity of this implied representation or omission is “deceptive” in violation of the UDAAP statute regardless of the creditor’s subjective belief that the debt was collectible. Under that combination of theories, a creditor’s failure to “disclose” any violation of state law that the CFPB concludes is “material”—even if the creditor reasonably believes that its practices comply with state law—may give rise to a federal “deception” charge.

One can expect the CFPB to use a similar “bootstrap” approach to relying on other state law violations as a predicate to its UDAAP enforcement authority in future litigation, and reliance on the advice of counsel regarding state law compliance will not afford a consumer financial services provider a safe harbor from accusations of wrongdoing by the CFPB. Given the CFPB’s active and aggressive approach to UDAAP enforcement, consumer financial services providers would be well-advised to evaluate their state law compliance programs and scrutinize very closely bank partnership models. We also believe that other federal agencies such as the Federal Trade Commission (FTC) and Federal Communications Commission (FCC), which have longstanding authority similar to the CFPB’s UDAAP authority, could view this decision as judicial encouragement to exercise their authority in this space as well.

The decision presumably will be appealed to the US Court of Appeals for the Ninth Circuit, where CashCall’s prospects for success are unknown at this time.

Copyright © 2016 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

Wells Fargo fined $185 million for Fraudulently Opening Accounts for Customers

For years, Wells Fargo employees secretly issued credit cards without a customer’s consent. They created fake email accounts to sign up customers for online banking services. They set up sham accounts that customers learned about only after they started accumulating fees.

On Thursday, these illegal banking practices cost Wells Fargo $185 million in fines, including a $100 million penalty from the Consumer Financial Protection Bureau, the largest such penalty the agency has issued.

Federal banking regulators said the practices, which date back to 2011, reflected serious flaws in the internal culture and oversight at Wells Fargo, one of the nation’s largest banks. The bank has fired at least 5,300 employees who were involved.

In all, Wells Fargo employees opened roughly 1.5 million bank accounts and applied for 565,000 credit cards that may not have been authorized by customers, the regulators said in a news conference. The bank has 40 million retail customers.

Some customers noticed the deception when they were charged unexpected fees, received credit or debit cards in the mail that they did not request, or started hearing from debt collectors about accounts they did not recognize. But most of the sham accounts went unnoticed, as employees would routinely close them shortly after opening them. Wells has agreed to refund about $2.6 million in fees that may have been inappropriately charged.

Wells Fargo is famous for its culture of cross-selling products to customers — routinely asking, say, a checking account holder if she would like to take out a credit card. Regulators said the bank’s employees had been motivated to open the unauthorized accounts by compensation policies that rewarded them for opening new accounts; many current and former Wells employees told regulators they had felt extreme pressure to open as many accounts as possible.

“Unchecked incentives can lead to serious consumer harm, and that is what happened here,” said Richard Cordray, director of the Consumer Financial Protection Bureau.

Wells said the employees who were terminated included managers and other workers. A bank spokeswoman declined to say whether any senior executives had been reprimanded or fired in the scandal.

“Wells Fargo is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request,” the bank said in a statement.

One Wells customer in Northern California, Shahriar Jabbari, had seven additional accounts that he did not consent to, according to a lawsuit he filed against the bank last year in federal court.

When Mr. Jabbari called the bank asking what he should do with three new debit cards he did not authorize, a bank employee told him to dispose of them, according to the lawsuit.

Mr. Jabbari said in the lawsuit that his credit score had suffered because unpaid fees on the unauthorized accounts had been sent to a debt collector.

Banking regulators said the widespread nature of the illegal behavior showed that the bank lacked the necessary controls and oversight of its employees. Ensuring that large banks have tight controls has been one of the central preoccupations of banking regulators after the mortgage crisis.

Such pervasive problems at Wells Fargo, which has headquarters in San Francisco, stand out given all of the scrutiny that has been heaped on large, systemically important banks since 2008.

“If the managers are saying, ‘We want growth; we don’t care how you get there,’ what do you expect those employees to do?” said Dan Amiram, an associate business professor at Columbia University.

It is a particularly ugly moment for Wells, one of the few large American banks that have managed to produce consistent profit increases since the financial crisis. Wells has earned a reputation on Wall Street as a tightly run ship that avoided many of the missteps of the mortgage crisis because it took fewer risks than many of its competitors. At the same time, Wells has managed to be enormously profitable, as other large banks continued to stumble because of tighter regulations and a choppy economy.

Analysts have marveled at the bank’s ability to cross-sell mortgages, credit cards and auto loans to customers. The strategy is at the core of modern-day banking: Rather than spend too much time and money recruiting new customers, sell existing customers on new products.

Wells Fargo markets itself as the quintessential Main Street lender, stressing the value of creating long-term relationships with customers over earning a quick buck.

But that apple-pie approach was undercut, regulators say, by a compensation program that encouraged employees to push the limits.

“It is way out of character for one of the cleanest banks around,” said Mike Mayo, a banking analyst at CLSA. “It’s a head-scratcher why so many employees felt comfortable crossing the line.”

In many cases, customers took notice only when they received a letter in the mail congratulating them on opening a new account.

Many of the questionable accounts were created by moving a small amount of money from the customer’s current account to open the new one.

Shortly after opening the sham account, the bank employee closed it down and moved the money back, according to regulators.

But Wells employees were still most likely able to get credit for opening new accounts in meeting their sales goals, the regulators said.

In addition to the fine from the consumer protection bureau, Wells paid $35 million to the Office of the Comptroller of the Currency and $50 million to the City and County of Los Angeles. The Los Angeles city attorney worked with banking regulators on the case.

On Thursday, the bank stressed that the refunds have been relatively small — averaging about $25. The bank hired an independent consultant that reviewed tens of millions of accounts from May 2011 through July 2015.

The bank said it refunded money to customers if there was even the slightest possibility they were charged improperly because of unauthorized accounts.

“As a result of our customer-first methodology, we believe we included accounts that were actually appropriately opened and authorized by a customer,” the bank said in a statement.

Even regulators concede that the financial harm to consumers was not large. But the more troubling aspect, they said, was how the behavior reflected a broader culture inside Wells’s retail operations.

“Consumers must be able to trust their banks,” said Mike Feuer, the Los Angeles city attorney. “Consumers must never be taken advantage of by their banks.”

Stock of Wells Fargo, which is the largest bank in the country by market capitalization but fourth-largest by assets, rose 13 cents on Thursday, to $49.90 a share.

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