Do Wells Fargo, U.S. Bancorp investigations signal a new era at CFPB?

Wells Fargo and U.S. Bancorp disclosed this week that they are under investigation by the Consumer Financial Protection Bureau over conduct that may have harmed their customers.

The disclosures, which came in quarterly securities filings, do not make clear whether the investigations began under Presidents Trump or Biden, and in Wells Fargo’s case, the probe involves business practices that first attracted public scrutiny in 2019.

Still, the timing of the disclosures raises questions about whether a shift is taking place at the agency charged with protecting consumers from financial abuses.

Legal observers have been expecting the consumer agency to focus more attention on enforcement, and particularly enforcement cases against big banks, during the Biden administration than it did under Trump-appointed Director Kathy Kraninger.

Cases against large banks have the potential to make a bigger impact than those against smaller firms, argued Chi Chi Wu, a staff attorney at the National Consumer Law Center. “I think it’s certainly our hope, and maybe somewhat our expectation, that the CFPB would not continue Kraninger’s pattern of going after small fish,” she said.

The CFPB delivered more than $10 billion of relief to consumers in 2014 and 2015, but it collected less than $3 billion over the next five years combined, spanning the tenure of both Obama-era Director Richard Cordray and his Trump-era successors.

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While the Kraninger-led agency brought 48 enforcement actions last year, the second-highest total in the bureau’s history, the penalties that it collected were less than 20% of those collected in the agency’s peak year, in large part because many of the companies targeted were relatively small.

But the agency’s recent enforcement record is nuanced. Sales practices, which landed Wells Fargo in trouble starting in 2016, are one area where the agency’s scrutiny of big banks has spanned both Republican and Democratic administrations.

In a securities filing on Tuesday, U.S. Bancorp revealed that it is under investigation by the CFPB regarding “certain of the company’s consumer sales practices.”

The Minneapolis-based firm disclosed that it “has responded and continues to respond to the CFPB.” It added that it is “cooperating fully with all pending examinations, inquiries and investigations, any of which could lead to administrative or legal proceedings or settlements.”

A U.S. Bancorp spokesperson said in an email Thursday that the company cannot provide additional information because of the confidential nature of supervisory work.

"It is important to note that due to their complex nature, regulatory exams, inquiries and investigations often take some time before they are resolved," the statement read.

After the Wells Fargo fake-accounts scandal broke in 2016, then-U.S. Bancorp CEO Richard Davis said that the company did not impose sales quotas on its bankers and had “never, ever” looked at cross-sell ratios.

U.S. Bancorp has a conduct risk committee that oversees the risks associated with ethics complaints, internal fraud and sales practices conduct, according to regulatory filings by the company. The $553.8-billion asset company also has a sales practices oversight policy that is designed to ensure a unified approach across the company to prevent or otherwise detect sales misconduct, it said in a report published last year.

The CFPB declined to comment on the investigation.

In 2019, the CFPB opened a civil investigation into Bank of America to determine whether the Charlotte, North Carolina, company violated federal law by opening credit card accounts without customers’ knowledge. That investigation began during Cordray’s tenure.

Last year, the consumer bureau sued Cincinnati-based Fifth Third Bancorp for allegedly opening customer accounts without their authorization between 2010 through 2016. That case is expected to go to trial in 2022 or later, unless a settlement is reached.

Since 2018, the CFPB has reached settlements with TCF Financial and TD Bank Group in connection with the marketing and sale of overdraft services. And in November, Regions Financial disclosed that it was responding to a civil investigative demand from the CFPB over certain overdraft policies and practices.

In Wells Fargo’s latest regulatory disclosure, the company revealed that it is under investigation by the CFPB in connection with past disclosures to consumer deposit customers regarding the minimum debit card usage that was required to receive a waiver of monthly fees.

Wells stated in 2019 that it was reviewing past disclosures regarding the minimum debit card usage that was necessary to avoid paying monthly fees, and that it expected to make refunds to affected customers. But it did not reveal the CFPB investigation until Wednesday.

A Wells spokesman said in an email Thursday that the bank is issuing refunds to customers who may have found its previous disclosures unclear.

“Wells Fargo has simplified the options for our customers to avoid the monthly service fee on their checking account, and we no longer offer an option to waive the monthly service fee based on debit card usage,” the spokesman said.

Wells Fargo previously charged customers $10 per month to maintain either an Everyday Check or an Opportunity Checking account, but waived the fee for customers who conducted at least 10 transactions per month, according to a 2019 letter by Rep. Katie Porter, D-Calif.

“ATM withdrawals are not credited toward that ten-transaction threshold,” Porter wrote, “but for years and despite the bank’s knowledge of widespread confusion among its customers, those customers were not informed of the exclusion of these transactions in the bank’s calculations.”