MIL-OSI USA: Menendez, Banking Dems to OCC: Public Has Right to Know

By   /  June 15, 2018  /  Comments Off on MIL-OSI USA: Menendez, Banking Dems to OCC: Public Has Right to Know

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Source: United States Senator for New Jersey Bob Menendez

Lawmakers demand federal regulator release full findings of review that discovered potential industrywide abuses at top U.S. banks Consumers left in the dark after industrywide practices flagged by regulator, but names of banks withheld

WASHINGTON, D.C. – U.S. Senator Bob Menendez, a senior member of Senate Banking Committee, today led Committee Democrats in calling for the Office of the Comptroller of the Currency (OCC) to come clean with the American public by releasing detailed findings on U.S. banks engaged in predatory sales practices or other misconduct that harms consumers.  The OCC has concluded its horizontal review of sales practices at large and mid-size banks under the agency’s supervision following the Wells Fargo fraudulent account scandal, but has since refused to make key details of its review public, including identifying the bad actors.

“Consumers deserve to know whether the institutions with which they choose to bank engage in predatory sales practices,” the senators wrote to Comptroller Joseph Otting.  “Keeping key details of the review private leaves consumers vulnerable and unaware of any potential abuses their financial institutions perpetrated against them as well as any similar practices by other banks.  Ultimately, failure to disclose detailed results of the review leaves the American public and bank investors blind to the possibility that Wells Fargo’s misconduct was an industrywide problem.”  

The senators requested a “comprehensive and detailed summary” of OCC’s findings, including the volume and types of misconduct uncovered, which institutions were engaged in such misconduct, the number of consumers impacted, and whether, like at Wells Fargo, the companies had incentive compensation plans that may have encouraged the abusive sales practices.

In 2016, former Comptroller Thomas J. Curry directed a horizontal review of sales practices at more than 40 national banks and federal savings associations supervised by the OCC, which resulted in 252 Matters Requiring Attention (MRA), including five industrywide MRAs and most banks covered by the review receiving at least one MRA.

The OCC, Consumer Financial Protection Bureau (CFPB), and the Los Angeles City Attorney levied significant fines and penalties against 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 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.

“The number and scope of MRAs issued as a result of your completed review suggest that the sales abuses perpetrated by Wells Fargo might be a broader industrywide problem,” the letter continued.  “As members of the Senate Banking Committee, it is vital that we have all the relevant information to assess practices impacting consumers in the banking industry.

The letter was cosigned by Sens. Sherrod Brown (D-Ohio), Jack Reed (D-R.I.), Elizabeth Warren (D-Mass), Brian Schatz (D-Hawaii), Chris Van Hollen (D-Md.), Catherine Cortez Masto (D-Nev.) and Doug Jones (D-Ala.).

Full text of the letter is below and can be downloaded here:

June 14, 2018

 

The Honorable Joseph Otting

Comptroller of the Currency

Office of the Comptroller of the Currency

400 Seventh Street SW

Washington, D.C. 20219

 

Dear Comptroller Otting:

 

It has come to our attention that the Office of the Comptroller of the Currency (OCC) has concluded its horizontal review of sales practices at large and mid-size banks under the agency’s supervision and does not plan to make key details of the review public.   We appreciate the broad overview the OCC provided to the Committee on June 11, 2018, which confirms press reports of the review’s findings.  However, we are concerned that the decision to keep the specific findings of the review private leaves consumers exposed to past and future predatory behavior and impedes our ability as lawmakers to effectively conduct oversight over the banking industry, which is under our jurisdiction.

On September 8, 2016, the OCC together with the Consumer Financial Protection Bureau and the Los Angeles City Attorney announced enforcement actions against Wells Fargo for sales practices tied to the unauthorized opening of deposit and credit card accounts, which ultimately totaled 3.5 million unauthorized accounts.  

Due to concerns that Wells Fargo was not the only bank engaged in such practices, in 2016 former Comptroller Thomas J. Curry directed a horizontal review of sales practices at banks supervised by the OCC,  and we appreciate your decision to continue this review.  The 2016 sales practice inquiry, which covered more than 40 national banks and federal savings associations, has recently concluded and resulted in 252 Matters Requiring Attention (MRA), including five industrywide MRAs.   Moreover, most banks included in the review received at least one MRA.  The quantity and scale of the MRAs indicate that abusive sales practices were and continue to be far more prevalent than originally thought.

Consumers deserve to know whether the institutions with which they choose to bank engage in predatory sales practices.  Keeping key details of the review private leaves consumers vulnerable and unaware of any potential abuses their financial institutions perpetrated against them as well as any similar practices by other banks.  Ultimately, failure to disclose detailed results of the review leaves the American public and bank investors blind to the possibility that Wells Fargo’s misconduct was an industrywide problem.  

We asked you about the horizontal review in a January 17, 2018 letter, and in your response you said, “[t]he horizontal review did not identify systemic issues with bank employees opening accounts without customers’ consent.  Where isolated instances occurred, banks had already corrected the issue or are in the process of doing so.”   We understand that in January, the report had not been completed and perhaps all relevant information was not available when you responded.  However, the number and scope of MRAs issued as a result of your completed review suggest that the sales abuses perpetrated by Wells Fargo might be a broader industrywide problem. 

Now that the review is complete, we respectfully request that you provide a comprehensive and detailed summary of your findings, including the volume and types of misconduct uncovered; whether, if any, MRIAs (Matters Requiring Immediate Attention) were issued, a description of when such misconduct occurred; the number of consumers impacted, disaggregated by state; a description of any incentive compensation plans that may have encouraged the sales practice misconduct; a general summary of the Action Plans that the OCC required banks to create and the expected timeline of adoption of such Action Plans; a progress report outlining banks’ adoption of OCC’s recommended inventory of practices to improve banks’ management of sales practice risk; the amount of remediation payments required and the timeline for the completion of such remediation; and whether the banks that engaged in misconduct used, and/or seek to enforce, forced arbitration clauses in contracts used to create unauthorized accounts.

Our staff will work with your office to ensure the confidentiality of any applicable supervisory information.  In the past, the OCC has been diligent in providing helpful public reports on unsafe and unsound banking practices of interest to the public without compromising the confidentiality of supervisory information.  For example, during the Independent Foreclosure Review, the OCC issued a detailed public report with charts demonstrating the volume and types of deficient mortgage servicing and foreclosure processing at 15 mortgage servicers.  This information allowed the public to understand different servicers’ performance records and progress in remediating borrowers.   A similarly-organized report related to abusive sales practice violations and progress in remediating impacted customers would be useful to the public.

As members of the Senate Banking Committee, it is vital that we have all the relevant information to assess practices impacting consumers in the banking industry.  Therefore, we respectfully request a full and comprehensive summary of your findings. 

We look forward to your response, and your testimony today in front of the Senate Banking Committee.

Sincerely, 

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MIL OSI USA News

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