Wachovia Settles OCC Suit for $144 Million

The bank 'failed to take quick action' to stem 'questionable' transactions between customers and telemarketers.
By Debra Borchardt ,

After an 18-month federal investigation,

Wachovia Bank

(WB) - Get Report

on Friday agreed to pay as much as $143.9 million in restitution and penalties to the federal government and customers harmed by the bank's relationship to telemarketers.

The nation's fourth-largest bank agreed to make up to $125 million in restitution payments to consumers, mostly elderly ones, harmed by telemarketers engaged in practices deemed "questionable" by the Office of the Comptroller of the Currency. Additionally, the bank must pay a $10 million civil penalty and $8.9 million to fund consumer education programs directed at the elderly.

According to the OCC, the telemarketers obtained bank account information over the phone by offering products and services such as grant writing kits, identity theft certificates, medical discount plans and vouchers for discount travel and groceries. Four telemarketers or payment processors -- Payment Processing Center, FTN Promotions (formerly known as Suntasia), Netchex and Your Money Access -- and related companies, would obtain account information over the phone and have money directly withdrawn from victims' accounts, the agency said.

Wachovia did not admit or deny any wrongdoing, but OCC said bank officials became aware of the telemarketers actions and "failed to take quick action to terminate these account relationships or otherwise correct the problem." Wachovia will develop new policies and procedures with respect to payment processors for telemarketers.

The OCC also has issued updated guidance to national banks regarding the need for effective due diligence, underwriting and monitoring of entities that process payments for telemarketers and other merchants.

Wachovia stock rose 3.3% to $28.28 in recent trading Friday. It and other bank stocks like

Citigroup

(C) - Get Report

,

JPMorgan Chase

(JPM) - Get Report

,

Bank of America

(BAC) - Get Report

and

Washington Mutual

(WM) - Get Report

were rising on news that government-sponsored mortgage giant

Fannie Mae

(FNM)

was buying more mortgages in March.

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