Dodd-Frank News Center

OCC and Justice Department take action against Wells Fargo over alleged SCRA violations

This story appeared in Bank Digest.

The Office of the Comptroller of the Currency has assessed a $20 million civil money penalty against Wells Fargo Bank, N.A., and ordered the bank to make restitution to servicemembers who were harmed by the bank's alleged violations of the Servicemembers Civil Relief Act. The OCC is taking this action in coordination with the Justice Department's Civil Rights Division, which issued a separate order under which the bank agreed to pay more than $4.1 million to resolve allegations that it violated the SCRA by repossessing 413 cars owned by protected servicemembers without obtaining a court order.

According to the OCC, between approximately 2006 and 2016, Wells Fargo failed to: (1) provide the 6-percent interest rate limit to servicemember obligations or liabilities incurred before military service; (2) accurately disclose servicemembers' active duty status to the court via affidavits prior to evicting those servicemembers; and (3) obtain court orders prior to repossessing servicemembers' automobiles.

The Justice Department settlement covers repossessions that occurred between Jan. 1, 2008, and July 1, 2015, and is still subject to court approval.

• OCC Consent Order for a Civil Money Penalty
• OCC Consent Cease and Desist Order
• Justice Department press release
• Justice Department Complaint
• Justice Department Consent Order

Fed proposes fine-tuning capital review, easing burden on smaller banks

This story appeared in Bank Digest.

The Federal Reserve Board is proposing changes to its annual Comprehensive Capital Analysis and Review that would relieve large but noncomplex firms from the requirement to complete the qualitative assessment. The proposal would benefit bank holding companies and foreign companies' intermediate holding companies that have between $50 billion and $250 billion in consolidated assets, on-balance sheet foreign exposures of less than $10 billion, and consolidated nonbank assets of less than $74 billion, the Fed said. Related reporting requirements also would be eased.

Fed Governor Daniel K. Tarullo explained the Fed's thinking and outlined possible future amendments in remarks prepared for the Yale School of Management Leaders Forum. According to Tarullo, the proposed changes are results of a review of the Dodd-Frank Act stress test and CCAR program that began after the 2015 testing cycle. Comments on the proposal must be received by Nov. 25, 2016.

In a statement, Rep. Blaine Luetkemeyer (R-Mo) said that while the announcement "represents a step forward, a risk-based approach is a better way to both protect consumers and promote economic growth."

Senators call on Wells Fargo to end use of forced arbitration clauses

This story appeared in Bank Digest.

Senators Sherrod Brown (D-Ohio), Patrick Leahy (D-Vt), and others have written to Wells Fargo CEO John Stumpf requesting that the bank end the use of forced arbitration clauses that prevent customers whose names were used to open fraudulent accounts from seeking justice in court. The letter referred to recent revelations "that over the course of five years, Wells Fargo employees opened as many as two million sham accounts in the names of Wells Fargo customers and charged customers for those accounts without their permission."

According to the letter, forced arbitration clauses "eliminate consumers' ability to bring a claim in open court or to band together in a class action, before any dispute has arisen." Consumers "must seek justice individually, on a case-by-case basis in closed-door arbitration proceedings that are often stacked in favor of the corporate defendant."

The senators also said there was little doubt "that the ability to force customers into secret arbitration proceedings allowed Wells Fargo to continue its outrageous practices with impunity for far too long." In addition, they asked for answers to several questions "so that we can better understand the situation at Wells Fargo and how we can prevent similar fraudulent practices in the future."

Senators request Labor Department investigation of Wells Fargo

This story appeared in Bank Digest.

Senators Elizabeth Warren (D-Mass), Sherrod Brown (D-Ohio), Jack Reed (D-RI), Robert Menendez (D-NJ), Bernard Sanders (I-Vt), Jeff Merkley (D-Ore), Kirsten Gillibrand (D-NY), and Mazie Hirono (D-Hawaii) have written to Labor Secretary Tom Perez and Wage and Hour Division Administrator David Weil requesting that the Labor Department investigate whether Wells Fargo violated the Fair Labor Standards Act with respect to its account executives, bank tellers, branch managers, and customer service representatives. Wells Fargo recently agreed to a $185 million settlement with federal regulators and the City and County of Los Angeles over the creation of more than 2 million deposit and credit card accounts that may not have been authorized by customers.

 According to the senators, any investigation into Wells Fargo's potential FLSA violations "should include a comprehensive inquiry into whether Wells Fargo aggressively skirted overtime laws--failing to pay overtime to bank tellers and associates who stayed late or came in on weekends to meet their sales quotas, or misclassifying salaried bank associates as overtime-exempt to avoid paying the overtime guaranteed to them by the FLSA.”

CFPB updates Civil Penalty Fund FAQs

This story appeared in Bank Digest.

The Consumer Financial Protection Bureau has released an updated version of frequently asked questions concerning the bureau's Civil Penalty Fund. Among the changes are updated answers to question 10--regarding the Civil Penalty Fund Allocation Schedule--to reflect allocations made through May 2016, and to question 12 to update the amount collected in the Civil Penalty Fund through June 30, 2016. The bureau also altered the wording of question 11, which concerns how consumers can find out if they will receive payment from the Civil Penalty Fund.

Anniversary of Lehman Brothers' collapse noted in Treasury blog

This story appeared in Bank Digest.

Treasury Department spokesperson ​​​Rob Friedlander used a "Treasury Notes" blog post to discuss the eighth anniversary of the collapse of Lehman Brothers, which he said was "a bankruptcy that sent shockwaves through the global financial system and helped thrust our economy into the worst recession since the Great Depression." He said since this collapse, "our economy has turned around and we've made enormous progress creating a more stable and secure financial system."

 Friedlander credited the Dodd-Frank Act as being a key reason the U.S. financial system has become stronger but said more work remains to be done. He said "we have to remain vigilant and continue to guard against efforts to chip away at the reforms and protections we've put in place."

House Financial Services Committee passes Financial CHOICE Act

This story appeared in Bank Digest.

The House Financial Services Committee passed the Financial CHOICE Act, the Republican-sponsored measure that is intended to serve as an alternative to the Dodd-Frank Act, on Sept. 13, 2016. The bill (H.R. 5983) passed the committee by a vote of 30-26. Committee Chairman Jeb Hensarling (R-Texas) said the legislation "holds Wall Street accountable with the toughest, strongest, strictest penalties ever--far greater than those in Dodd-Frank" and added that it "will help grow the economy for all Americans, not just those at the top."

In contrast, during committee consideration of the bill, Democrats moved to cut off debate and hold an immediate vote on the measure, contending it was so toxic that it was unamendable. Ranking Member Maxine Waters (D-Calif) said the bill "is so bad that it simply cannot be fixed." She added that the legislation was "a rushed, partisan messaging tool, though why anyone would want to push legislation to deregulate Wall Street at a time like this is beyond me."

Brainard discusses economy's 'new normal' and monetary policy

This story appeared in Bank Digest.

Federal Reserve Board Governor Lael Brainard spoke at the Chicago Council on Global Affairs in Chicago, Ill., on Sept. 12, 2016. The subject of her prepared remarks was "The 'New Normal' and What It Means for Monetary Policy." Brainard began her remarks by describing what she believes are key features of the "new normal" in today's economy, which differ from the "old normal" that prevailed before the financial crisis.

After describing these features of the new normal that she said "are most salient for conditioning policy," Brainard gave her views on recent economic developments and their implications for policy.

Hensarling introduces Financial CHOICE Act

This story appeared in Bank Digest.

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has formally introduced the Financial CHOICE Act (H.R. 5983), the Republican alternative to the Dodd-Frank Act. The Financial CHOICE Act is intended to end taxpayer-funded bailouts of large financial institutions, provide regulatory relief for banks that elect to be strongly capitalized, impose tougher penalties on those who commit financial fraud, and demand greater accountability from Washington regulators.

 In a statement, Hensarling said the bill "promotes strong and transparent markets to revitalize job creation in our poorest communities and ensures every American has the opportunity achieve financial independence, no matter where they start out in life." The Financial Services Committee will begin meeting on Tuesday, September 13 to debate the Financial CHOICE Act, consider possible amendments, and vote on the legislation.

Agencies issue report on permissible banking activities and investments

This story appeared in Bank Digest.

The Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency have released a report to Congress and the Financial Stability Oversight Council on the activities and investments that banking entities may engage in under applicable law. The Dodd-Frank Act required the agencies to conduct a study and report to Congress on the types of activities and investments permissible for banking entities, the associated risks, and how banking entities can mitigate those risks.

 According to the agencies' joint release, each agency prepared the section of the report relative to the banking entities that it supervises, and each of the report's three sections includes a discussion of permissible activities, risk mitigation, legal limitations, and specific recommendations.

 In a press release, Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) commended the agencies for recommending that Congress limit Wall Street's investments in merchant banking and physical commodities. Brown said the recommendations "are welcome news for consumers, taxpayers, and manufacturers, and for the safety and soundness of our financial system."