Warren to CFPB Director Rohit Chopra: Break Up Wells Fargo, Cheating Consumers is in Bank’s DNA
Washington D.C. — During a Senate Committee on Banking, Housing and Urban Affairs hearing exchange with Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, United States Senator Elizabeth Warren (D-Mass.) highlighted the need to hold Wells Fargo and other repeat offenders of financial consumer protection laws accountable. Senator Warren reiterated her calls for the Federal Reserve to use its authority to break up the large bank. This exchange follows Director Chopra’s speech last month urging regulators to “forcefully address repeat lawbreakers” by applying “remedies that are more structural in nature,” including asset caps, banning business practices, and revoking government-granted privileges like FDIC insurance.
Senator Warren called out Wells Fargo for being one of the worst repeat offenders in the financial system and listed the many times the bank has broken the law and cheated consumers, including: forcing consumers to buy unneeded car insurance; changing information on consumers’ documents without authorization; illegally repossessing cars from service members; closing customers’ accounts without authorization and continuing to charge them overdraft fees even after accounts were closed; recommending unsuitable products to mom-and-pop investors; and putting up to 1,600 customers into forbearance without their consent.
Director Chopra agreed with Senator Warren on the need for broader action:
“We have to look at a broader array of remedies in banking. The Federal Deposit Insurance Act talks about limitations on FDIC Insurance. There are asset caps like we see that the Federal Reserve Board did or that the OCC has done. We have to look at structural remedies that stop the law-breaking from continuing, fines are not going to solve this with the biggest players. And frankly, I think if we care about equal justice, we should treat small firms and large firms the same.”
Event: Senate Committee on Banking, Housing, & Urban Affairs
Date: April 26, 2022
Topic: The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress
Senator Elizabeth Warren: So Director Chopra, on March 28, you gave a speech in which you focused on repeat offenders—not the little guys, but the giant banks and corporations that repeatedly break the law even after regulators have imposed fines, consent orders, and lawsuits. Now, this is a serious problem, and I want to talk today about one of the worst repeat offenders in our entire financial system: Wells Fargo.
In 2016, Wells Fargo’s fake accounts scandal was exposed. The company’s leadership had squeezed their employees to create 3 1/2 million unauthorized bank accounts.
Director Chopra, do you recall how much Wells Fargo was fined in 2016 for this fake accounts scandal?
Director Rohit Chopra: I want to say it was, $180, $185 million dollars.
Senator Warren: That’s right, including $100 million of that was from the CFPB. Now that was a big fine. And the CFPB and other regulators were right to impose it. But keep in mind that Wells Fargo booked more than $5 billion in profits that year. So maybe we shouldn’t be surprised that a fine alone was not enough to persuade Wells Fargo to follow the law. Because over the next few months, the following scandals came to light:
- Wells forced consumers to buy unneeded car insurance,
- They changed the information on customers’ documents without authorization,
- And they illegally repossessed cars from service members.
In 2018, the regulators finally said: enough. And under then-Chair of the Federal Reserve, Janet Yellen’s leadership, the Fed put a cap on Wells Fargo’s growth.
Now, that was pretty shocking at the time, but it still wasn’t enough to get Wells to follow the law. Since then, Wells has:
- Closed customers’ accounts without authorization, damaging people’s credit reports and, just to rub salt into the wound, continued to charge them overdraft fees even after the accounts were closed;
- Wells has also been fined by the SEC for recommending unsuitable products to mom-and-pop investors;
- It put up to 1,600 customers into forbearance without their consent;
- And, just a few months ago, Wells was hit with another fine by the OCC and a new consent order because the bank is still screwing over consumers.
It appears that cheating consumers is simply in Wells Fargo’s DNA.
Director Chopra, the asset cap on Wells Fargo was a much-needed step, but it’s clear we’re dealing with the baddest of the bad here. What other steps should regulators consider to hold Wells Fargo, and other corporations that break the law over and over again, to hold them accountable.
Director Rohit Chopra: Well I don’t want to comment on any specific case but here’s what I see. I see federal enforcers and regulators are very quick to lay the hammer down on small guys and small businesses. They will name people individually, they will ban them from certain business practices, and often criminally refer them for prosecution but there is a totally different standard for large firms who break the law over and over again. Yes, they do pay a fine but often it is less than the profits that they made from the misconduct. We have to look at a broader array of remedies in banking. The Federal Deposit Insurance Act talks about limitations on FDIC Insurance. There are asset caps like we see that the Federal Reserve Board did or that the OCC has done. We have to look at structural remedies that stop the law-breaking from continuing, fines are not going to solve this with the biggest players. And frankly, I think if we care about equal justice, we should treat small firms and large firms the same.
Senator Warren: I agree with you. Thank you. You know, I think it’s clear that fines have just become a cost-of-doing business for giant corporations like Wells. And we can put a stop to that.
The Fed has the power to break Wells Fargo up—and they should do it now. And in addition, I’m reintroducing my Corporate Executive Accountability Act to hold big bank executives personally liable when the companies they run repeatedly break the law.
Look, we’re not going to get any changes in corporate America unless we change the rules for repeat offenders and their CEOs. And I appreciate your leadership on this issue, Director Chopra, and I look forward to working together with you.
I also would like to address the comments from my Republican colleagues who have accused Director Chopra of a quote “hostile takeover” of the FDIC, a coup, and a lawless overreach. Look, they can call it whatever they want, but here are the facts: the previous FDIC Chair acted in violation of the FDIC bylaws to block the committees’ majority and she chose to resign when it became clear that she didn’t have a leg to stand on. We need regulators who are going to follow the law and who are going to use their authority to safeguard the financial system. And I’m glad that we have that kind of regulator now.
Thank you. Thank you, Mr. Chairman.
Chairman Brown: Thank you, Senator Warren.
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