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.