Another Crooked Bank?

A dozen locations in Rhode Island

By Phil Mattera for the Dirt Diggers Digest

When one large corporation is found to be breaking the law in a particular way, there is a good chance that its competitors are doing the same thing. The latest evidence of this comes in an announcement by the Consumer Financial Protection Bureau concerning U.S. Bank.

The CFPB fined the bank $37.5 million for illegally accessing credit reports and opening checking and savings accounts, credit cards, and lines of credit without customers’ permission. U.S. Bank employees were said to have done this in response to management pressure to sell more financial products and thus generate more fee revenue.

If this sounds familiar, it is exactly what came to light in 2016 regarding Wells Fargo, which was initially fined $100 million by the CFPB for the fraudulent practice and subsequently faced a wave of other legal entanglements, including a case brought by the U.S. Justice Department in which Wells had to pay $3 billion to resolve civil and criminal charges.

The U.S. Bank case has not yet generated the tsunami of outrage that accompanied the revelations about the phony accounts at Wells. Perhaps that is because it is the middle of the summer. Yet chances are that the CFPB’s enforcement action will not be the only punishment the bank will face.

U.S. Bank’s practices were no less egregious than those of Wells. According to the CFPB, the management of the bank, which currently has more than half a trillion dollars in assets, was aware for more than a decade that its employees were creating fictitious accounts.

And like Wells, U.S. Bancorp has a long history of questionable behavior. Violation Tracker documents more than $1.2 billion in penalties from 40 cases dating back to 2000. Half of the total comes from offenses involving serious deficiencies in anti-money-laundering practices, including a 2018 case in which the bank had to pay $453 million to settle criminal charges brought by the U.S. Justice Department plus another $75 million to the Office of the Comptroller of the Currency to resolve civil allegations.

In 2014 U.S. Bank had to pay $200 million to settle allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the Federal Housing Administration that did not meet applicable requirements. The bank also had a previous run-in with the CFPB, which penalized it $53 million in 2014 for unfairly charging customers for credit identity protection and credit monitoring services they did not receive.

It is likely that U.S. Bank’s penalty total will rise substantially through additional cases prompted by the CFPB’s latest allegations, which include accusations the bank violated not only the Consumer Financial Protection Act but also the Fair Credit Reporting Act, the Truth in Lending Act, and the Truth in Savings Act.

Apart from monetary penalties, U.S. Bank may face an additional form of punishment applied to Wells: in 2018 the Federal Reserve restricted the growth of the firm until it cleaned up its practices and improved its governance. Since fines have proven to be a weak deterrent against corrupt practices at major financial institutions, more aggressive measures provide the only hope of bringing the big banks under control.