WASHINGTON — The Consumer Financial Protection Bureau does not deserve credit for rooting out fraud at Wells Fargo, Republican lawmakers said Wednesday.
The agency secured the largest portion of the $190 million in fines and restitution paid by the San Francisco bank, taking action along with the Office of the Comptroller of the Currency and Los Angeles city attorney against the firm's "unfair, deceptive and abusive" practices.
But there are disputes over who uncovered the fraud first. The L.A. city attorney opened its investigation after articles by the Los Angeles Times in 2013 made the misconduct public, while the bank claims it self-reported the problems to the OCC the same year and to the CFPB in 2015.
While Democrats and Republicans are equally appalled by the level of fraud and the apparent toxic sales culture at the bank, GOP lawmakers are frustrated that the CFPB appears to be receiving the credit for stopping it.
"Everybody is trying to sort out the timelines here and it looks like Wells Fargo self-reported," Rep. Bill Huizenga, R-Mich., said in an interview at the National Association of Federal Credit Unions conference here on Wednesday. "So I am not sure this is a great investigation by the CFPB. I think they had the violation handed to them."
He echoed House Financial Services Committee Chairman Jeb Hensarling, who similarly raised questions about the consumer bureau's role.
"The customers of Wells Fargo deserve justice and we need accountability for the government agencies that are in charge of enforcing the law. … Where was the CFPB? Why did they come in so late to the game?" the Texas Republican said during a Fox Business interview on Wednesday. "They have immense powers and this is their job to enforce these basic consumer laws and it appears they were asleep at the switch."
Some Republicans also accused the CFPB of not being cooperative when the Senate Banking Committee began looking into the Wells case.
"As the committee worked to gather facts regarding the response and role of the regulators, the OCC was forthcoming with details, while the CFPB was not," said a Republican committee aide who spoke on condition of anonymity.
A CFPB spokesman said the agency is required to keep some supervisory information confidential. "We continue to make every effort to be responsive to congressional requests for information about our work," he said.
The role of the CFPB in the case is important. Treasury Secretary Jack Lew said the bureau discovered the fraud, while presidential candidate Hillary Clinton and other Democrats cited the Wells case as proof of the need for a strong consumer regulator.
Several Democrats also raised the issue during a Senate Banking Committee hearing on Tuesday.
"I think you're sending a very loud message to the banks and a loud message to my Republican colleagues who continue to attack the agency," Sen. Elizabeth Warren, D-Mass., told CFPB Director Richard Cordray. "Wells Fargo may wish that the CFPB would disappear, and some Republicans may keep trying to leash up this watchdog, but that's not going to happen."
The exact timeline of who discovered what and when is unclear. It appears that two articles by the Los Angeles Times in 2013 talking about the mass terminations of employees for fraud and citing the bank's "pressure-cooker sales culture" prompted an investigation by the city attorney.
The OCC said it first received a "small number of complaints in 2012" about the bank, but increased its scrutiny in 2013, after the newspaper articles. That same year Wells told the OCC, but it did not involve the CFPB until 2015. The OCC and CFPB later joined the city attorney's investigation.
During the hearing, Cordray said it "bothered" him that Stumpf acknowledged telling the OCC without informing the CFPB. "If any institution feels that they can divide and conquer among the regulators, they should know that that is a mistake," said Cordray.
But some lawmakers feel the CFPB is overstating its role. Corday said the bureau first learned about the misconduct in "mid-2013 through whistleblower tips" but did not launch a full investigation at the time, noting the resources the bureau was looking into other consumer protection issues.
Senate Banking Committee Chairman Richard Shelby pressed Cordray on whether the bureau conducted its own analysis to find the roughly two million phony accounts or if it relied on a PricewaterhouseCoopers report that was done at the behest of Wells.
"Is that number based on PwC, PricewaterhouseCoopers analysis?" asked Shelby.
Cordray responded that "it's based on our investigation and there were internal documents Wells Fargo provided that confirmed and were consistent with what we found through our investigation."
The CFPB consent order with Wells cites the figures from the PwC report.
The widespread nature of the Wells fraud can be seen not just as an indictment of the bank's senior management, but the regulatory process itself, lawmakers argue. They are raising questions about why a newspaper and local attorney could uncover fraud at the bank, while the OCC and CFPB did not through their regular exams.
"They are certainly are not doing their core mission of preventing, detecting consumer fraud," Rep. Andy Barr, R-Ky., said in an interview at the NAFCU conference. "This is not an argument for enhancing the powers of the bureau. In fact, it is evidence of regulatory incompetence."
Barr said the public should know more about the timeline of events and why the fraud was able to fester.
"When did [CFPB] find out, when did they first learn that there could be a cultural problem or a UDAAP [unfair, deceptive, abusive acts and practices] problem or a fraud problem," Barr said. "They are not telling our staff."
The CFPB has declined to say how it learned of the fraud, but has said the bank did not self-report it.
Barr said it's legitimate to investigate Wells' behavior, "but I think an equally important question is what is the CFPB doing?"
But Rep. Maxine Waters, the lead Democrat on the House Financial Services Committee, dismissed questions about the CFPB's involvement as another political assault on the agency.
"This attack on the CFPB is a continuous effort," she said in an interview. "They have to undermine the CFPB, so we are not going to pay any attention to that. To talk about the fact that they should have known is not important."
Cordray also said during the Senate hearing that regulators are not concerned with who gets credit for what.
"We don't sit around as partners and think about what percentage of the credit we should allocate to one another," Cordray said. "We're looking to get a good result for consumers."
Kate Berry contributed to this article.
