The Consumer Financial Protection Bureau has taken aim at the nation's largest banks through a string of recent fines and investigations, and attorneys and analysts do not expect the agency to slow down anytime soon.
In recent months, the CFPB has announced actions against Bank of America Corp. and Regions Financial Corp., handing down millions of dollars in penalties. The agency is also engaged in "resolution discussions" with Wells Fargo & Co. to settle multiple investigations and inquiries, the company disclosed Oct. 31. One day later, U.S. Bancorp also disclosed in a regulatory filing that it is under CFPB investigation.
Director Rohit Chopra has zeroed in on the nation's largest institutions as a warning to the broader marketplace, according to former CFPB Regulatory Counsel Eamonn Moran, now senior counsel at law firm Norton Rose Fulbright.
"It's pretty apparent that he's ambitious and he leads a powerful agency," Moran told S&P Global Market Intelligence. "There's a willingness to go after major market players."
In targeting the largest banks, the CFPB is sending a message of "compliance, compliance, compliance" to all banks under its supervision, said Anthony DiResta, partner at law firm Holland & Knight.
"Banks must have a robust compliance management system in place, covering all relevant legal, regulatory and consumer protection issues," in order to dodge additional scrutiny from the agency, DiResta said.
Attorneys and analysts interviewed for the story did not address any specific case.
Big banks are on high alert in the face of increased CFPB scrutiny, according to Chris Willis, co-leader of the Consumer Financial Services Regulatory Practice at Troutman Pepper.
"Large banks are operating in a higher-threat environment than they were in the last administration," Willis said in an interview.
As the agency looks to send a message to financial institutions through enforcement actions and fines, large banks are often open to negotiating with the CFPB out of concern for their reputations, former officials said.
"Banks have always been sensitive to how the bureau will respond" to their actions, said Jonathan Engel, co-leader of the enforcement and investigations practice within the banking and financial services group at law firm Davis Wright Tremaine and a former CFPB enforcement official.
The CFPB's main objective in handing down these fines is to motivate big banks to fix the behaviors it views as problematic, one analyst said.
"The idea of these actions is not just that [banks] can pay a fine as the cost of doing business, but they have to change whatever the behavior was," Ian Katz, managing director of Capital Alpha Partners, said. "That's part of the agreement. They can't just pay for it like it's a bill."
Chopra takes aim
Chopra hinted at looming regulatory actions against the nation's largest financial institutions in a March 28 speech.
"Large dominant firms should be subject to the same consequences of enforcement actions as small firms," he said. "We need to move away from just monetary penalties and consider an arsenal of options that really work to stop repeat offenses."
The official followed through on his words in the following months as the CFPB assessed fines and took other actions against big banks.
In May, the agency ordered Bank of America to pay $10 million penalty and refund or cancel imposed fees of at least $592,000 to harmed customers related to alleged illegal garnishments. The agency also required the bank to review and reform its garnishment system.
Just two months later, the CFPB joined the Office of the Comptroller of the Currency in ordering Bank of America to pay a combined $225 million in fines over alleged violations related to the bank's administration of a prepaid card program to deliver public benefit payments. U.S. Bancorp disclosed this month that it is facing an investigation regarding a similar matter.
In September, the CFPB upped the ante in its fight against "junk fees" by fining Regions Bank $191 million for allegedly charging "illegal" surprise overdraft fees to customers. It also banned the bank from charging authorized-positive fees.
And at the end of October, Wells Fargo disclosed in a regulatory filing that it is in talks to resolve multiple CFPB investigations related to auto lending, consumer deposit accounts and mortgage lending. The company could be facing a settlement of more than $1 billion, Bloomberg News reported Nov. 4.
As the CFPB increases its enforcement actions, banks are starting to push back, one former CFPB official said.
"Many consumers have bank accounts and credit card fees, and many consumers pay fees, so the CFPB may conclude that criticism of such fees is an issue with broad appeal," John Coleman, a partner at law firm Buckley LLP, said in emailed comments.
However, banks are already highly regulated and generally are transparent with regulators and "may reasonably view some of the changes that the CFPB is pushing banks to adopt as coming without warning or process," Coleman, a former deputy general counsel at the CFPB, said.
"Disagreements about both substance and process are beginning to bubble up to the surface," he added.