April 25 (Bloomberg) -- Wachovia Corp. will pay as much as $144 million to settle a U.S. regulator's claims that the bank's poor oversight allowed telemarketers and payment processors to withdraw millions of dollars from customers' accounts.

Wachovia, the fourth-largest U.S. bank, will pay as much as $125 million in restitution to customers, a $10 million civil penalty and $8.9 million for consumer-education programs, the U.S. Office of the Comptroller of the Currency said today in a statement on its Web site. The Charlotte, North Carolina-based bank agreed to the settlement without admitting or denying wrongdoing, the Washington-based OCC said.

The settlement stems from an 18-month investigation that determined Wachovia profited from fees and other charges on accounts maintained by payment processors and telemarketers who took advantage of thousands of consumers, most of them elderly, from June 2003 through December 2006.

``The OCC concluded that the bank engaged in unsafe or unsound practices during the course of its relationships with the payment processors and telemarketers,'' the agency said today in its news release.

Telemarketers got account information over the phone by selling consumers ``questionable'' products such as identity- theft certificates, according to the statement. The information was then used to transfer funds from customers' accounts to Wachovia accounts held by the companies without authorization or without providing products, the regulator said.

Wachovia's risk-management and loss-management employees ``failed to take quick action to terminate these account relationships or otherwise correct the problem,'' the OCC said.

`Unacceptable Situation'

``This situation was unacceptable and we regret it happened,'' Wachovia spokeswoman Christy Phillips Brown said in a telephone interview. ``We will work diligently to provide restitution to consumers affected by the situation and to educate consumers. Wachovia is pleased to have resolved this matter.''

Two class-action lawsuits filed on behalf of former Wachovia customers seek total damages of more than $500 million, said Howard Langer, the Philadelphia attorney representing the customers. The cases are scheduled for trial in November in the U.S. District Court for the Eastern District of Pennsylvania.

``The behavior of Wachovia was extraordinarily shameful,'' said Langer, a partner at Langer Grogan & Diver. ``It wasn't just the money that the telemarketers took, but also that Wachovia charged its own customers hundreds of thousands of dollars in overdraft fees.''

It was the second-biggest settlement demanded by the OCC, agency spokesman Robert Garsson said. The largest was a $300 million agreement with Providian National Bank in 2000 for unfair and deceptive business practices involving credit card rates and fees.

``This is a historic settlement,'' said Carl Tobias, a professor at the University of Richmond School of Law in Virginia. ``One doesn't usually consider the OCC to be an aggressive enforcement agency like the SEC.''

Regulatory Settlement

The regulatory settlement requires Wachovia to develop new policies for payment processors, telemarketers and so-called remotely created checks used for telephone and online transactions. The telemarketers and payment processors used remote checks, which aren't created by accountholders and don't carry signatures, to transfer customers' funds into Wachovia accounts.

Garsson declined to comment on the settlement beyond the statement.

The OCC, the U.S. Treasury Department unit that regulates national banks, issued guidelines yesterday calling for better underwriting and monitoring of companies processing payments for telemarketers and other merchants. The agency oversees about 1,700 national banks and 50 U.S. branches of foreign banks.

Wachovia shares rose $1.43, or 5.2 percent, to $28.81 at 4:15 p.m. in New York Stock Exchange composite trading.

To contact the reporters on this story: Alison Vekshin in Washington at avekshin@bloomberg.net; David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: April 25, 2008 18:52 EDT