Unconstitutional CFPB ‘Asleep at the Wheel’ on Wells FargoPosted by on April 06, 2017
Los Angeles Times – Republicans Attack Consumer Financial Watchdog as They Push For His Firing
Part of the GOP attack focused on the Wells Fargo case as they argued the watchdog agency “was asleep at the wheel” in identifying that the bank was creating unauthorized accounts and only got involved after the Los Angeles Times and Los Angeles City Attorney Feuer had uncovered the problems.
The CFPB began an investigation into Wells Fargo only after the bank contacted the agency and the Los Angeles city attorney had filed a civil complaint, according to documents released by the House Financial Services Committee.
Documents released by Chairman Jeb Hensarling included a May 8, 2015 letter from the CFPB to Wells in which the bureau says news reports in the Los Angeles Times and the city complaint have raised “significant concerns and questions” about Wells Fargo’s sales practices.
The documents unveiled Wednesday showed Wells Fargo notified the CFPB on May 4, 2015, that it had received a civil complaint from the Los Angeles city attorney’s office and that the Los Angeles Times was planning to report on the complaint the following day. On May 8, the CFPB told the bank that it was initiating a supervisory review, saying the materials received from the bank “raised significant concerns and questions about Wells Fargo’s consumer financial services sales practices.”
On March 3, 2016, the CFPB informed Wells Fargo that it had decided to initiate an enforcement process, a day after the bank started settlement negotiations with Los Angeles officials.
Ann Wagner, head of the panel's oversight subcommittee, painted the CFPB as a latecomer in uncovering Wells Fargo's fraudulent sales practices. She repeatedly pressed Cordray to specify about when he prompted the agency's staff to begin its investigation of the San Francisco-based bank, suggesting the agency was "asleep at the wheel" until press reports emerged.
Other GOP lawmakers, including Sean Duffy and Hensarling, also chastised Cordray for failing to reply to dozens of subpoena requests, including one tied to Ally Financial for discriminatory pricing in the lender's auto loans, and for not certifying compliance with lawmakers' requests.
Congressional Republicans on Wednesday ramped up their criticism of Consumer Financial Protection Bureau Director Richard Cordray, citing previously undisclosed documents they say contradict his timeline of the agency’s investigation of Wells Fargo & Co.’s consumer fraud scandal.
Wagner’s questioning focused on a previously undisclosed letter dated May 8, 2015, where the CFPB referred to an earlier civil complaint by the Los Angeles city attorney and a Los Angeles Times news story about Wells Fargo’s fake accounts. That letter, she said, shows that the CFPB failed to take a leading role in addressing Wells Fargo’s issues.
Republicans spent the more than five hours of the hearing making the case for Cordray’s dismissal. They argued that Cordray’s CFPB routinely overstepped legal and jurisdictional boundaries and prized flashy, expensive fines over consumer freedom.
Multiple Republicans argued that the CFPB ignored signs of fraud at Wells Fargo before fining the bank more than $180 million last September for opening more than 2 million unauthorized accounts.
Republicans claimed the agency failed to detect wrongdoing at Wells Fargo & Co, relying on outside investigators and news reports to point out widespread problems with improper account creation.
“The CFPB was asleep at the wheel!” said Ann Wagner, a Missouri Republican. The earliest the committee could determine the CFPB began to examine Wells Fargo was in May 2015, after the bank notified the regulator that the Los Angeles City Attorney was already pursuing a civil case, she said.
Yet the CFPB was front and center in September 2016 when the high-profile $185 million multi-agency settlement was announced.
This semiannual hearing happened in the midst of controversy around the bureau and Cordray’s position.
Rep. Sean Duffy, R-Wisc., interrogated Cordray on his tenure at the CFPB, bringing up the fact that Cordray has already been at the bureau for five years and three months…meaning he will actually serve longer than his five-year term, which officially ends in July 2018.
He said that under Cordray’s direction, the CFPB has shown an “utter disregard” for protecting markets and has made credit more expensive.
“For conducting unlawful activities, abusing his authority and denying market participants due process, Richard Cordray should be dismissed by our President,” the chairman said.
A congressional panel has found signs of “suspicious trading” in the stock of the nation’s largest student loan servicing company before the firm was hit with a federal lawsuit that might have sent shares plunging…Rep. Patrick McHenry, R-N.C., the vice chairman of the House Financial Services Committee, made the disclosure during a politically-charged session on the performance of the Consumer Financial Protection Bureau.
“Unfortunately, committee staff has learned of suspicious trading activity for the Navient Corporation the morning before the announcement of CFPB’s enforcement action,” McHenry said. The disclosure came after McHenry asked CFPB Director Richard Cordray if he know of “any confidential leaks” that “led to insider trading.”
Hensarling and other lawmakers accused Cordray of failed leadership at an agency they said stifles business and is slow to respond to actual wrongdoing. The hearing comes as a federal appellate court in Washington reconsiders a ruling last year that the structure of the agency — which is headed by a director who can only be removed by the president for cause — is unconstitutional.
“You have a rotting agency,” said Rep. Sean Duffy, R-Wisc., referring to 2014 congressional testimony by CFPB employees claiming racial and sex discrimination and retaliation.
Rep. Ann Wagner, R-Mo., angrily accused Cordray of dragging his feet in probing claims of fraudulent practices at Wells Fargo, which resulted in the bank paying $185 million in fines last year. She noted that the CFPB’s involvement came after news reports and a separate probe by Los Angeles officials.
“The CFPB was asleep at the wheel — asleep at the wheel, Director Cordray — under your leadership!” Wagner said.