Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB),
has publicly defended his management of the Wells Fargo unauthorized accounts
mishap. Cordray said that the agency handled the issue appropriately,
in responding to mounting criticism from Republicans that the CFPB failed
to detect the problem early on, charges that have prompted a congressional
investigation regarding the agency’s handling of the case.
In a June letter to Rep. Jeb Hensarling (R-Texas), chairman of the House
Financial Services Committee, Mr. Cordray claimed he was proud of the
CFPB’s efforts in the Wells Fargo case. The correspondence was the
latest in an ongoing feud between Cordray, a Democrat leading the influential
CFPB, and Hensarling, who has requested that President Trump fire Cordray
and is backing legislation to revamp the CFPB’s structure.
The Republican-controlled House passed Hensarling’s bill in June
2017. The proposed legislation would make significant changes, including
depriving the CFPB of directly monitoring financial entities for compliance
with consumer protection mandates and restricting public access to the
agency’s records of consumer complaints.
In September 2016, Wells Fargo reached a settlement agreement for $185
million with the Office of the Comptroller (OCC) of the Currency and Los
Angeles City Attorney Mike Feuer to resolve CFPB investigations into its
sales activities. The bank did not admit guilt but conceded that its employees
had opened millions of checking, savings, and credit card accounts that
were never authorized by its customers. Since the settlement, the bank
has admitted the scandal was even larger than first realized.
Republicans in Congress have claimed that the CFPB failed to pick up on
Wells Fargo’s illegal activity until it was made public by the Los
Angeles Times in December 2013. A subsequent investigation into the matter
by Feuer resulted in a 2015 civil claim. Cordray has denied those accusations,
testifying that the CFPB began looking into the Wells Fargo issue following
the receipt of whistle-blower disclosures in early 2013.
The House Financial Services Committee has been analyzing Wells Fargo’s
conduct and the related regulatory performance. On June 6, the committee
staff released a report stating that the CFPB failed to produce any record
showing that it had initiated investigation efforts before Feuer filed
his civil claim. The committee threatened to hold Cordray in contempt
of Congress for not submitting subpoenaed documents regarding the CFPB’s
Wells Fargo investigation. The report claimed that the CFPB only produced
1,010 pages of duplicated records from the OCC and Wells Fargo. It also
stated that the committee had not received any documents verifying Cordray’s
claims that the Bureau had begun supervision of Wells Fargo’s sales
activity before Feuer’s 2015 court filing.
In his letter to Hensarling, Cordray asserted that the CFPB handed over
more than 57,000 documents to the committee in response to what he deemed
was an overly-broad request. Cordray stated that the CFPB’s monitoring
of Wells Fargo’s sales started before it formally notified the bank
about the issue. He also claimed that he and the committee staff interpreted
the meaning of supervisory activity differently—emphasizing that
the Bureau started internal processing on the matter in 2014 and its regional
supervisory personnel chose to schedule an inspection of Wells Fargo in 2015.
Jeff Emerson, a spokesman for Hensarling, responded that Cordray’s
response was insufficient and now question whether Cordray intentionally
misled Congress on the matter.