Comptroller of the Currency Joseph Otting is fighting back against accusations, made by some Senate Democrats, that his agency dragged its feet on responding to the lessons learned from last year’s problematic behavior at Wells Fargo.
Sen. Bob Menendez (D-N.J.) has claimed that “lapses in government oversight failed to prevent Wells Fargo’s widespread fraudulent account scandal while ignoring numerous red flags.” His letter to 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).
It explained that 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 letter claimed, the agency has failed to implement "any of these corrective measures."
Not true, Otting fired back in a response obtained by Compliance Week. The letter from the Senators, he wrote, incorrectly stated that the “OCC has taken no steps to implement the recommendations” from the lessons learned and later states that “the OCC should implement the review’s recommendations without additional delay.”
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.
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.
The Comptroller’s new response is intended to correct the record and provide a list of the actions taken to address each of the nine lessons, eight of which have been completed. The ninth, Otting wrote, is scheduled to be completed by June.
The Comptroller sent an individually addressed letter to each of the Senators who signed the January 17 letter.
“Had we had the opportunity to respond prior to your letter being provided to reporters and made part of press releases, I could have assured you that your ‘serious concerns’ were unfounded and your reference to the ‘OCC’s continued failure to implement its recommendations’ is completely inaccurate,” Otting wrote. “Events leading to the OCC’s enforcement action against Wells Fargo for its unsafe or unsound sales practices and the agency’s review of its supervision related to those practices occurred prior to my becoming Comptroller of the Currency. I do not condone the behavior and practices found at the bank. As Comptroller, I will not tolerate such unsafe and unsound practices within the federal banking system, nor will I tolerate banks’ mistreatment of their customers or betrayal of customers’ trust. The men and women of the 0CC provide world-class bank supervision, and I am 100 percent committed to continuously improving our capabilities so that we operate as effectively and efficiently as possible.”
“Your letter is wrong to suggest that the 0CC has not taken steps to implement the recommendations from its internal review,” he added.
Otting detailed work done thus far to improve its Large Bank Supervision reports, including a renewed process to assess the effectiveness of handbook guidance; ensuring appropriate testing and follow-up on concerns and enforcement actions; evaluating systemic root causes of reputation risk; ensuring effective agency communication; emphasizing compliance with internal policies; quality assurance procedures to test compliance and improve data integrity and management information systems; evaluating the timeliness and effectiveness of follow-up; updating enterprise-wide whistleblower reviews and external-facing interfaces (including referrals to helpwithmybank.gov) to inform whistleblowers to a single office for the public or other governmental recording; documenting and tracking how agencies communicate and follow up on whistleblower claims; and providing better guidance and procedures for analyzing complaint data.
The OCC stressed improved collaboration and coordination with appropriate business units when issues are identified, including with LBS Examiner-in-Charge meetings, LBS steering committee meetings, and LBS Risk Committee meetings. The agency also continues to have all relevant business units represented in its National Risk Committee (NRC) meetings, NRC Steering Committee meetings, Consumer Issues Committee meetings, and Consumer Issues Steering Committee meetings.
“While the vast majority of actions to address each of the nine lessons have been completed, our work is not done,” Otting wrote. “Staff will continue to use its heightened awareness in its quarterly quality assurance reviews to ensure the accuracy and quality of the supervisory record and other bank supervision products. That is an ongoing process intended to enhance the overall quality of our supervisory work.”
“Your letter also mentions the horizontal review of sales practices at large and midsize banks supervised by the agency,” he added. “That work was conducted in three stages and is nearing completion. The horizontal review did not identify systemic issues with bank employees opening accounts without the customers’ consent. Where isolated instances occurred, banks had already corrected the issue or are in the process of doing so.”
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