10 Most Shameful Bank Scandals Of 2013

By Investopedia | December 31, 2013 AAA

By Katherine Muniz

This year brought a whirlwind of shocking announcements and news that would go on to affect every corner of the globe, including the number of banking scandals uncovered in some of the world's largest countries, including the U.S.

10. Banks breaking into homes

Independent contractors (typically low-paid workers without training) working indirectly for banks were given permission to enter "abandoned" properties to do maintenance and simple repairs. However, many of these contractors entered homes that were still occupied by owners, and took it upon themselves to allegedly change locks and steal valuables inside.

9. Wells Fargo and Bank of America sued for $2.15 million

FINRA, The Financial Industrial Regulatory Authority, the biggest independent securities regulatory company, fined the brokerage divisions of Wells Fargo and Bank of America for $2.15 million based on allegations that the bank sold floating-rate bank loan funds that harmed the risk options of its clients.

8. Wells Fargo paid National Fair Housing Alliance $42 million

Wells Fargo agreed to settle on allegations that it purposely neglected maintaining and marketing foreclosed homes in black and Latino neighborhoods, nationwide, for $42 million.

7. TD Bank paid $52.5 million settlement tied to Ponzi scheme

The Securities and Exchange Commission and the Office of the Comptroller of the Currency were awarded $52.5 million in a settlement by TD Bank to resolve allegations that it failed to act on suspicious activity in accounts tied to a $1.2 billion Ponzi scheme, as well as lied about the accounts in talks with investors.

6. HSBC forked over $2.5 billion in damages on fraud case

Household International, a mortgage and credit card company, made false statements about their business to mislead investors and inflate its stock price artificially. The company also used predatory lending practices to increase sales. HSBC, which absorbed the company in 2002, has agreed to pay $2.5 billion in damages to thousands of former shareholders in Household International.

5. Ten major banks paid for foreclosure abuse

JPMorgan Chase, Bank of America, and Wells Fargo, among other major banks, agreed to pay $8.5 billion for wrongfully foreclosing on homeowners that had the right to stay in their homes.

4. JPMorgan Chase in hot water

JP Morgan Chase & Co. paid $920 million in penalties to settle allegations of a $6.2 billion trading loss due to violating securities laws when managers withheld information from the Securities and Exchange Commission board in 2012. The bank also agreed to repay consumers that faced unfair treatment with the bank's flawed handling of credit-card debt collections. In November, the bank settled claims over their sale of mortgage-backed securities with the Justice Department for $13 billion.

JPMorgan turned around and sued the Federal Deposit Insurance Corp. over the $1 billion costs they had to foot as a result of their acquisition of Washington Mutual from the FDIC in 2008. As of December 17, the bank is being sued by Mississippi Attorney General Jim Hood for making "false and misleading statements" over old debts, forcing customers to pay for debts that had already been paid in full.

3. International manipulation of the Foreign Exchange Market (Libor Scandal)

In Nov., an ongoing inquiry widened to include 15 of the biggest banks, including Barclays, Citigroup, Deutsche Bank, Goldman Sachs, JPMorgan Chase, and UBS regarding the collaboration that took place between the banks' traders to set benchmark exchange rates that would be favorable to them, causing higher costs for pension funds, mutual funds, multinational corporations, and other bank clients that purchase and sell currencies.

Other consequences stemming from the allegations regard the clients' customers, including both investors and consumers, who faced lower returns or higher prices due to the inflated transaction costs trickling down to affect them.

2. Is Bank of America the most corrupt bank?

In Jan., the Bank of America agreed to pay Fannie Mae over $11 billion to settle claims that they knowingly made bad mortgages before the financial crisis of 2007, and sold these mortgages to the government, causing Fannie Mae to suffer significant losses when those borrowers defaulted.

In April, it was reported that the bank lead the consumer complaints list filed with the Consumer Financial Protection Bureau, far outranking Wells Fargo & Co. and JPMorgan Chase & Co. In June, affidavits were filed by dozens of Bank of America borrowers in 26 states, alleging the bank routinely and knowingly denied qualified borrowers the opportunity to modify their loans to more affordable terms that could have saved these individuals their houses.

According to six former employees, "We were told to lie to customers. Site leaders regularly told us that the more we delayed the HAMP [loan] modifaction process, the more fees Bank of America would collect." The allegations also state that BofA paid cash bonuses to bank staffers who gave customers the run around, pushing them into foreclosure.

Also, in April, BofA spent $881 million on litigation fees to settle allegations that Countrywide (the trouble-ridden mortgage shop the bank purchased in 2008) misled investors about $351 billion worth of mortgage-backed securities they had, namely, that the securities were of good quality.

In September, BofA announced that it would pay $39 million to settle charges of gender bias in its Merrill Lynch brokerage division. The settlement had to do with alleged discrimination against women in their firm, regarding compensation and business opportunities.

1. Death of Bank of America intern

Intern Moritz Erhardt, was found dead in the shower after having worked three consecutive all-nighters. The 21-year-old suffered an epileptic seizure. Hazing practices of pulling late night work hours are not uncommon in the banking industry, as there are enormous workloads that come with being an intern.

To sum up 2013's banking news, many of the biggest banks settled for millions and billions of dollars for wrongdoing, fraud, and illegal activity that harmed investors and consumers and lived up to the unfortunate reputation that big banks are indeed, corrupt.

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