Fifth Third Bank Pays $5 Million to Settle Auto Insurance Litigation Allegations

Fifth Third Bank has agreed to pay millions to settle allegations that it foreclosed on auto loans Customers were overloaded with duplicate auto insurance policies, resulting in higher monthly payments. In some cases, vehicles were impounded for customers who could not afford the costs.

The Consumer Financial Protection Bureau said in court documents Tuesday that the Ohio bank misapplied about 37,000 insurance policies between 2011 and 2019. The agency ordered the bank to pay a $5 million fine and provide unspecified damages to affected customers.

CFPB Director Rohit Chopra said the bank “illegally loaded auto loans with excessive fees,” resulting in about 1,000 families losing their cars to repossession.

“We are directing Fifth Third’s top executives and board to clean up these bad business practices or face further consequences,” Chopra said.

The bank said it voluntarily ended its CFPB-designated auto insurance practices in 2019, before the agency began its investigation.

“We have already taken significant steps to address these legacy issues, including identifying problems and taking the initiative to correct them,” said Susan Zaunbrecher, chief legal officer at Fifth Third Bank, in a statement.

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It is the latest action by the CFPB against the bank, which was accused in 2020 of improperly opening accounts from 2010 through at least 2016. Fifth Third agreed Tuesday to pay $15 million to resolve the allegations.

The allegations about insurance policies are a separate issue, stemming from a unit of the bank that works with car dealers to offer auto loans.

For years, Fifth Third’s auto loans included “collateral protection insurance” provision that allows for the automatic addition of coverage for customers who do not carry their own insurance — a practice the CFPB describes as “forced underwriting.”

The provision was intended to give the bank a way to protect the loan collateral: the car itself. But more than half of the bank’s forced-insurance policies were applied to customers who were already insured or who got new insurance within 30 days of a previous policy expiring, the CFPB said.

“Fifth Third continued to impose insurance restrictions for years, demanding that consumers pay for insurance they didn’t need or face default, overage fees and even foreclosure,” the agency alleged.

According to the CFPB, the insurance policies had higher premiums than owners could get elsewhere, increasing a borrower’s monthly car payment by nearly $200 on average.

Those charges, CFPB said, were unlawful and led to some customers defaulting on their loans, with 1,005 customers seeing their vehicles repossessed. The forced insurance program ended in 2019, the CFPB and the bank said.

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