Consumer Financial Protection Bureau Director Richard Cordray decided to set the record straight on the bureau’s involvement and actions in the massive Wells Fargo fake account scandal after House Republicans accused him of slowing down the investigation. To Cordray, the claims on his lack of initiative in the investigation are unfounded and don’t tell the full story.
Last September the CFPB, Office of the Comptroller of the Currency and the city of Los Angeles came together to levy one the largest financial fines of its kind against Wells Fargo for the "widespread unlawful" practices of employees who opened more than 2 million fake accounts to get sales bonuses.
Over the last nine months since the announcement, Wells Fargo continued to work through the repercussions of its actions and so has the CFPB, as it works to defend its actions in the run-up to the announcement.
Back in April, during a heated exchange in the CFPB’s semi-annual hearing in front of the House Financial Service Committee, Rep. Ann Wagner, R-Mo., grilled Cordray on the bureau’s lack of initiative in the massive Wells Fargo fake account scandal.
Wagner argued that the CFPB touts its “independent and comprehensive” review in the Wells Fargo case, and yet they only interviewed three people.
“This does not seem very comprehensive to me sir,” said Wagner. “The CFPB was asleep at the wheel. Your investigation was far from independent and comprehensive.”
Then a few months later, a staff report came out from the House Financial Service Committee’s subcommittee on Oversight and Investigations, which is chaired by Rep. Ann Wagner, R-Mo., that accused Cordray of not complying with the committee’s request for records to help its probe.
As a result, Cordray wrote a letter to Housing Financial Services Chairman Jeb Hensarling, R-Texas., to correct the record on some of the things that were said in the staff report.
The letter, which HousingWire obtained a copy of, stated:
“The staff report follows up on the investigation that the Committee launched last September into two specific questions: '(1) how and why Wells Fargo allowed these fraudulent activities to occur at a disturbing scale across the Bank for well over a decade; and (2) whether or not federal financial regulators were effective in detecting and remedying Wells Fargo’s fraudulent branch sales practices.’ As the staff report notes, the Wells Fargo ‘practice of defrauding customers by opening millions of unneeded and at times, unauthorized bank accounts’ appears to have dated back to at least May 2001.”
For starters, Cordray stated it is notable that the CFPB did not even open its doors until July 2011, more than ten years after these activities commenced, and did not reach steady-state in its staffing and operations until about 2014.
“Nor does the staff report address whether or not federal financial regulators were effective in remedying Wells Fargo’s fraudulent branch sales practices," the letter stated.
House Democrats already came out against the Republican staff report, listing keys areas they think they report is wrong.
“Republicans have been clamoring to weaken, impede, and ultimately destroy the Consumer Bureau since its creation,” said Rep. Maxine Waters, D-Calif., ranking member of the Committee on Financial Services. “The Consumer Bureau charged Wells Fargo with a record $100 million fine for opening fake accounts and yet, Committee Republicans haven’t done anything to hold Wells Fargo accountable. This report is an insult to the millions of Americans who were harmed by Wells Fargo.”
The five-page response from Cordray works to correct the record on several key points.
“The first area concerns the claim made in the staff report that ‘the CFPB has not cooperated with the Committee’s investigation to date.’ The staff report suggests that the Consumer Bureau, and I myself, refused to brief Committee staff about the work we did on these matters. That is not what happened, and the staff report selectively mentions only some of the communications between the committee and the Consumer Bureau on this issue,” the letter stated.
Cordray also touched on points Wagner previously made against him, saying he has a different definition of comprehensive.
“As to whether our investigation was ‘comprehensive,’ in my mind it was, in the sense that it thoroughly canvassed the factual and legal issues at stake in the enforcement investigation into Wells Fargo’s improper sales practices, their effects on consumers, the consequent violations of the law, and the legal relief to remedy past violations and prevent future violations,” Cordray stated.
“Other work remains ongoing to this day, as the terms of the CFPB Order contemplated by installing an independent consultant and ensuring reporting about the implementation of compliance plans," the letter stated.
Cordray concluded that he is “quite proud of the CFPB team that has been working on the Wells Fargo matters, including those who worked with our partners to push forward and complete the enforcement action.”
He also added at the end that the bureau will continue to seek ways to cooperate with the committee’s oversights and to work toward and amicable resolution.
Cordray doesn’t respond to a lot of the claims made against the embattled CFPB, but this this Republican staff report put his job on the line. The letter called for contempt proceedings against Director Cordray if necessary.
As it stands, Cordray is set to stay in his position until his term ends in July 2018, but under the current law, the president may remove the director for “inefficiency, neglect of duty, or malfeasance in office.”
