Insurance Scandal: Fifth Third Bank Forced Customers into Pricey Policies, Leading to Vehicle Repossessions

Cincinnati, Ohio residents are among those affected by Fifth Third Bank’s recent agreement to settle allegations of improperly applying insurance policies to auto loan customers, resulting in higher monthly payments and vehicle repossessions. The Consumer Financial Protection Bureau (CFPB) revealed that the bank had wrongly imposed approximately 37,000 insurance policies from 2011 to 2019, leading to a $5 million penalty and orders to provide restitution to impacted customers.

According to CFPB Director Rohit Chopra, Fifth Third Bank engaged in questionable practices by loading auto loan bills with excessive charges, causing around 1,000 families to lose their cars due to repossession. Chopra warned the bank’s senior executives and board of directors to rectify these practices promptly.

Fifth Third Bank’s chief legal officer, Susan Zaunbrecher, addressed the issue by stating that the bank had taken steps to address the situation, ending the disputed auto insurance practices voluntarily in 2019 before the CFPB launched its investigation. Despite the bank’s actions, the CFPB pressed forward with allegations regarding the insurance policies, urging the bank to correct its operations.

In a separate incident, Fifth Third Bank faced accusations in 2020 for improperly opening accounts between 2010 and 2016, resulting in a $15 million settlement. The insurance policy issue arose from the bank’s collaboration with car dealers to provide auto loans, with a provision for “force-placed insurance” that automatically added coverage for uninsured customers.

The provision was intended to safeguard the loan collateral, notably the car itself. However, more than half of the force-placed policies were imposed on customers who were already insured or had acquired new insurance shortly after an earlier policy expired, as reported by the CFPB. These force-placed policies carried higher premiums than alternatives and inflated borrowers’ monthly payments by nearly $200 on average.

CFPB condemned Fifth Third Bank’s actions as unlawful, leading to customers falling behind on their loans, resulting in repossession for over 1,000 individuals. The force-placed insurance program ceased in 2019 following scrutiny from both the CFPB and the bank.