The Washington Wrap is a weekly look at regulation, news and chatter from the Capitol. Send tips and ideas to email@example.com.
On Capitol Hill
Almost a year after Wells Fargo & Co. caught Congressional heat for opening millions of unauthorized accounts, the San Francisco-based company is facing renewed calls to return to the Hill after admitting to faulty collateral protection insurance policies on over 500,000 auto loan customers.
Wells Fargo said July 27 that it charged premiums for collateral protection insurance even if consumers were paying for their own vehicle insurance. The company said it would pay as much as $80 million in remediation to affected customers.
Days later, Sen. Elizabeth Warren, D-Mass., and five other Senate Democrats urged Senate Banking Committee Chair Mike Crapo, R-Idaho, to call Wells Fargo CEO Timothy Sloan and Board of Directors Chair Stephen Sanger to testify. Warren has notably called for heavy regulatory consequences for Wells Fargo, and most recently asked the Federal Reserve to use its authority to remove the 12 existing directors of the company.
"Rather than weakening the rules on Wells Fargo, Congress should root out all the fraud at the bank and hold the right people accountable," Warren tweeted Aug. 2.
In the House, Bloomberg News reported that Financial Services Committee Chairman Jeb Hensarling, R-Texas, also plans on questioning the company — and its regulators. When then-CEO John Stumpf appeared before the House Financial Services Committee in September 2016, Republicans criticized the Consumer Financial Protection Bureau for allegedly failing to catch Wells Fargo in its fake accounts scandal earlier.
In light of its auto lending practices, Wells Fargo also faces a proposed class action lawsuit in the U.S. District Court of the Northern District of California and a subpeona from the New York Department of Financial Services. The company said Aug. 1 it will reorganize its auto lending unit to better control risks, Reuters reported July 27.
On July 28, Hensarling wrote a letter to the U.S. Office of Special Counsel asking to review CFPB Director Richard Cordray for possible violations regarding political activities while serving as a federal employee. In the letter, Hensarling alleges that Cordray may have violated the Hatch Act by indirectly contacting a potential primary rival in a possible run to be Ohio's next governor. The letter refers to news reports claiming that a mutual friend of Cordray reached out to William O'Neill, an Ohio Supreme Court Justice who is also the only Democrat holding statewide elected office, about the justice's intention to run for office.
Hensarling argued that by making this contact, Cordray may have broken federal employee laws by trying to secure a political nomination while serving as CFPB director.
Cordray is rumored to be considering an early exit from the CFPB to make a run at Ohio governor.
As Sen. Warren calls on the Federal Reserve to clear Wells Fargo's board, the Fed is proposing some streamlining of its supervisory expectations for directors of large financial institutions. On Aug. 3, the Fed said it would be accepting public comment on a proposal to refocus its corporate governance expectations on its "core responsibilities," designed to promote the safety and soundness of firms. The proposal would eliminate or revise some existing supervisory expectations.
On Aug. 4, the CFPB unveiled new prototypes on "Know Before You Owe" disclosures on overdraft coverage for automated teller machine and debit card transactions, designed to help consumers better understand the risks of opting in to overdraft protection. The agency said the disclosures are not part of a regulatory amendment, although the CFPB is still considering new overdraft regulations and is in the "pre-rule stage" of proposed rulemaking.
The CFPB declined to offer a timeline on possible work on a rule.
The Commodity Futures Trading Commission has a new podcast and in its most recent episode, Acting Comptroller of the Currency Keith Noreika made a guest appearance. In the podcast, Noreika continued his outspoken criticism of the current regulatory environment. He blamed the Federal Deposit Insurance Corporation for low de novo bank creation, and then accused the Dodd-Frank Act of disadvantaging community banks by setting a $50 billion threshold that encourages large banks to aggressively scale further in size.
"The people who are on one side of it use it as a way to create sort of a monopolistic or oligopolistic position where they have monopoly rents," Noreika said.
Noreika also defended his fintech charter, which is facing a lawsuit from the Conference of State Bank Supervisors in the U.S. District Court for the District of Columbia. On Aug. 2, the OCC moved to dismiss the lawsuit, citing lack of jurisdiction and failure to state a claim upon which relief can be granted.