Fifth Third Bank has agreed to pay $5 million to settle allegations it forced auto loan customers into duplicative car insurance policies.
This increased their monthly payments and led to repossessions for those who couldn’t afford the extra costs.
According to court documents filed by the Consumer Financial Protection Bureau (CFPB), the bank improperly applied around 37,000 insurance policies between 2011 and 2019.
As a result, the agency ordered the bank to pay a $5 million penalty and provide unspecified compensation to affected customers.
CFPB Director Rohit Chopra accused the bank of “illegally loading up auto loan bills with excessive charges.”
It led to the repossession of vehicles from approximately 1,000 families.
Chopra said: “We are ordering the senior executives and board of directors at Fifth Third to clean up these broken business practices or else face further consequences.”
Fifth Third Bank claimed the auto insurance practices highlighted by the CFPB were voluntarily ended in 2019, before the agency’s investigation.Â
Susan Zaunbrecher, the bank’s chief legal officer, said: “We have already taken significant action to address these legacy matters, including identifying issues and taking the initiative to set things right.”
This settlement marks the latest action by the CFPB against Fifth Third Bank, which in 2020 was accused of improperly opening accounts from 2010 to at least 2016.
On Tuesday, July 9, the bank agreed to pay $15 million to resolve those allegations.
The insurance policies often carried higher premiums than elsewhere, adding nearly $200 to borrowers’ monthly car payments
The insurance policy allegations stem from a division of the bank that collaborates with car dealers to offer auto loans.
Fifth Third’s auto loans included a “collateral protection insurance” provision for years.
It allows the bank to automatically add coverage for customers without their own insurance—a practice known as “force-placed insurance.”
Need Career Advice? Get employment skills advice at all levels of your career
This provision aimed to protect the loan collateral, the car itself.
The CFPB found that over half of these force-placed policies were applied to customers already insured or obtained new insurance within 30 days of a policy lapse.
The CFPB alleged Fifth Third continued to enforce these unnecessary policies, leading to delinquency, additional fees, and repossessions.
The insurance policies often carried higher premiums than elsewhere, adding nearly $200 to borrowers’ monthly car payments.
This burden led to some customers falling behind on their loans, with 1,005 vehicles being repossessed.
The CFPB and the bank confirmed that the force-placed insurance program ended in 2019.
