U.S. Senator Bob Menendez (D-N.J.), a senior member of the Senate Banking Committee, is among those urging bank regulators to act upon lessons learned from last year’s self-inflicted woes at Wells Fargo. He claims that “lapses in government oversight failed to prevent Wells Fargo’s widespread fraudulent account scandal while ignoring numerous red flags.”
The Office of the Comptroller of the Currency last April, issued a series of recommendations to strengthen consumer protections and oversight of the nation’s largest banks. Nine months later, the OCC has failed to implement any of these corrective measures.
Menendez letter to Comptroller Joseph Otting was cosigned by Sens. Sherrod Brown (D-Ohio), Jack Reed (D-R.I.), Elizabeth Warren (D-Mass.), Chris Van Hollen (D-Md.), Catherine Cortez Masto (D-Nev.) and Brian Schatz (D-Hawaii).
“The bank’s wide-ranging misconduct, which harmed millions of customers around the country, underscores the importance of timely, effective, and probing supervision not only for Wells Fargo, but for all large banks,” the letter says. “When the OCC fails to effectively monitor and intervene in the case of misconduct at regulated institutions, customers are susceptible to significant harm.”
The OCC, Consumer Financial Protection Bureau, and the Los Angeles City Attorney fined Wells Fargo in Sept. 2016 after a joint-investigation initially revealed aggressive sales practices at the bank led to the unauthorized opening of more than 1.5 million deposit accounts and 565,443 credit card accounts without the knowledge or consent of customers. Last August, Wells Fargo announced the number of unauthorized accounts was actually in upwards of 3.5 million, and has since been accused of misconduct and anti-consumer practices across its business lines, namely forcing auto loan borrowers to purchase unnecessary collision insurance and charging customers fees for extending interest-rate commitments on home mortgage loans.
“It is clear, however, that these practices undermine the relationships between banks and their customers, and when multiplied by the millions, they can create vulnerabilities in the nation’s banking system,” the letter says. “It is the OCC’s responsibility to ensure that banks that obtain a national charter operate in a safe and sound manner. Industry-wide pressure to boost profits is no justification for sales practices that harm customers.”
Former Comptroller Thomas Curry ordered a full independent review of the agency’s failures to identify, manage, and respond to clear risks from sales practices at the bank from 2009 to 2016. The resulting report was tiled, “Lessons Learned Review of Supervision of Sales Practices at Wells Fargo.” It recommended several initiatives to enhance complaint and whistleblower analysis and follow-up, strengthen supervisory communication and institutional accountability, and ensure systemic root causes of risk are identified and addressed at both the supervised bank and throughout the industry at-large. None of the recommendations have been implemented under the Trump Administration, leaving banking customers exposed to potential wrongdoing and fraud.
“While the agency identified aggressive sales practices as a potential problem in 2010, impacting the bank’s operational risk rating that year, the agency took no further actions to review those issues from 2011 through 2014. Furthermore, the review found the supervisory team failed to effectively communicate and follow-up on supervisory issues at Wells Fargo, failed to consider the volume and significance of customer complaints, and failed to establish an effective process to review whistleblower cases,” the letter says. “In sum, over the course of seven years, the supervisory team at Wells Fargo missed countless opportunities to escalate concerns about aggressive sales practices, prevent additional harm to customers, and hold responsible parties accountable.”
“The review was issued nearly nine months ago, and the OCC’s continued failure to implement its recommendations leaves vulnerable customers of the nation’s largest banks. We believe the OCC should implement the review’s recommendations without additional delay,” the letter concludes, seeking a detailed implementation schedule of each of the recommendations in the review by Jan. 31.