The Consumer Financial Protection Bureau has fined Wells Fargo & Co. more than all other enforcement targets combined. Most of Wells Fargo's bill has come under interim Director Mick Mulvaney, who has otherwise overseen a dramatic drop in the bureau's enforcement actions.
After the financial crisis, the 2010 Dodd-Frank Act mandated the creation of a regulator focused on consumer financial protection. The CFPB began operations in July 2011 but did not have a formally appointed director until January 2012. An analysis of the CFPB's 205 enforcement actions to date shows a sharp decline in activity since Mulvaney took office in November 2017. S&P Global Market Intelligence found that four actions against Wells Fargo outweigh all others when looking at civil penalties.
In total, the CFPB issued Wells Fargo $627.6 million in civil penalties, most of which came from a $500 million penalty over auto insurance charged to customers who did not need it and improper mortgage rate lock fees. All other defendants in CFPB actions have paid an aggregate $534.8 million of penalties.
Civil penalties are fines paid to the CFPB for misconduct and are separate from refunds the bureau makes companies pay to aggrieved consumers. Consumer refunds for Wells Fargo's actions have totaled $13.7 million compared to more than $5.5 billion for all other actions, combined.
Some analysts and lawyers say it was Wells Fargo's accumulation of scandals — not the individual actions — that triggered the record penalty. Wells Fargo's transgressions are not unique. The CFPB secured a consent order in 2014 with AmeriSave Mortgage Corp. over misleading mortgage rate practices and it hit a Citigroup Inc. subsidiary in 2017 for inappropriately, automatically billing customers for an insurance policy. The civil penalty fines for those cases were each about 1% of Wells Fargo's fine.
"The use of well-publicized, high-amount civil penalties is designed to discourage not only the target institution but to also send a message to other institutions," said Steven Kaufmann, a partner with law firm Morrison & Foerster focused on financial services and consumer litigation.
A spokesperson for the CFPB declined to comment. Wells Fargo also declined to comment for this story.
Ex-Wells Fargo, Mulvaney leads a quiet CFPB
The outsized Wells Fargo fine aside, there has been a dramatic drop-off in CFPB enforcement actions under Mulvaney's leadership.
Since Mulvaney took over as acting director, the agency has announced five new enforcement actions, some of which were the conclusion of investigations that began under his predecessor Richard Cordray. In addition to the Wells Fargo penalty, the CFPB pursued a credit card consent order with Citibank NA, two actions against debt collectors and one title loan action. At the same time, the regulator has shuttered investigations without any action, such as its probe into Zillow Group Inc., and there have been media reports that Mulvaney reduced the penalties in several cases.
"He has been systematically neutering the ability of the CFPB to pursue enforcement actions," said Karl Frisch, executive director of consumer advocacy group Allied Progress.
Mulvaney's rate of enforcement activity is a fraction of Cordray's. In his first nine months, Mulvaney's CFPB issued five enforcement actions, compared to 35 for Cordray in the year-ago period. However, it took Cordray's CFPB some time to stand up the enforcement division. Like Mulvaney, Cordray issued five enforcement actions during his first nine months.
"There seemed to be a freeze of enforcement activity when [Mulvaney] initially came into office and they now are back to business as usual," said Scott Pearson, a partner with law firm Ballard Spahr who has represented companies in CFPB actions. He also said Mulvaney has a "less aggressive philosophy" on enforcement activity.
Industry participants have welcomed that stance on enforcement action. The bureau's critics alleged that Cordray would issue fines without appropriate notice that certain practices were illegal. Mulvaney has noted that his predecessor's tendency to "push the envelope" would no longer define the CFPB.
"I don't think they'll be coming up with new or novel approaches or interpretations of the law that you didn't see previously," Morrison & Foerster's Kaufmann said. "It's going to be much more of a dialogue and a collaboration."
For consumer advocates such as Frisch, that is precisely the problem. "He's essentially outsourcing his work by going to companies, asking them how to fix the bureau," he said.
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For an industry document detailing all of the CFPB's enforcement actions to date, click here.
To read previous coverage of the CFPB's enforcement activity, click here and here.