Wachovia To Pay $144 Million To Settle Claims Over Targeted Elderly Customers

WASHINGTON (AP) -- Wachovia Corp. has agreed to pay an estimated $144 million to settle federal allegations that it failed to block telemarketers who took advantage of thousands of elderly bank customers.

The federal Office of the Comptroller of the Currency said Friday that Charlotte, N.C.-based Wachovia had improper relationships with four telemarketers and payment processors who maintained their accounts at the bank. The marketers obtained customers' bank account information while selling vouchers for discount travel and groceries and other products.

The bank has not admitted any wrongdoing, but will pay up to $125 million in claims, $8.9 million toward consumer education programs and a $10 million fine.

"This situation was unacceptable and we regret it happened, " said Wachovia spokeswoman Christy Phillips-Brown. "We will work diligently to provide restitution to consumers affected by the situation and to educate consumers."

She said the settlement is not expected to impact the company's financial condition. Wachovia shares rose 22 cents to $27.60 in morning trading.

The Wachovia case, the subject of an 18-month investigation by bank regulators, involved the use of "remotely created checks," which do not require a customer's signature.

Regulators said telemarketers would call Wachovia customers, offer them medical discount plants or other services, obtain customers' bank account information, create a check and withdraw cash from customers' accounts.

Since the telemarketers and payment processors were Wachovia customers, they could deposit those checks into their own Wachovia bank accounts, allowing money to be withdrawn quickly from consumers' accounts.

The government said a "large percentage" of customers complained, saying they never authorized the payments, or didn't receive the products or services offered.

Though the bank became aware of the situation. it "failed to take quick action to terminate these account relationships or otherwise correct the problem," the OCC said in a statement.

Phillips-Brown said the bank was not directly involved in the telemarketing activity or soliciting of account information from consumers.

The government said many affected consumers have already received reimbursement payments. It said the companies involved were: Payment Processing Center LLC, FTN Promotions Inc., Netchex Corp., and Your Money Access LLC.

AP Business Writer Ieva M. Augstums in Charlotte, N.C. contributed to this report.