Watch­dog on de­fense

Richard Cor­dray, head of con­sumer bureau, says he’s ‘quite proud’ of Wells Fargo probe.

Los Angeles Times - - BUSINESS BEAT - By Jim Puz­zanghera jim.puz­zanghera@la­times.com

WASH­ING­TON — The fed­eral govern­ment’s con­sumer fi­nan­cial watch­dog is de­fend­ing its han­dling of the Wells Fargo & Co. unau­tho­rized ac­counts scan­dal in the face of Repub­li­can charges that the agency failed to catch the prob­lem and has stymied a con­gres­sional in­ves­ti­ga­tion into how it han­dled the case.

Richard Cor­dray, di­rec­tor of the Con­sumer Fi­nan­cial Pro­tec­tion Bureau, said he is “quite proud” of the team that looked into Wells Fargo’s sales abuses.

“Clearly our team, along with our part­ners, has per­formed a tremen­dous pub­lic ser­vice here,” Cor­dray wrote last week to Rep. Jeb Hen­sar­ling (R-Texas), chair­man of the House Fi­nan­cial Ser­vices Com­mit­tee.

The let­ter is the lat­est salvo in a bat­tle be­tween Cor­dray, a Demo­crat who heads the pow­er­ful agency cre­ated in the af­ter­math of the 2008 fi­nan­cial cri­sis, and Hen­sar­ling, who has called for Pres­i­dent Trump to fire Cor­dray and is push­ing leg­is­la­tion that would gut the bureau’s power.

Hen­sar­ling’s bill, which passed the Repub­li­can-con­trolled House on a party-line vote this month, would strip the bureau of its abil­ity to closely mon­i­tor fi­nan­cial firms for com­pli­ance with con­sumer pro­tec­tion laws and elim­i­nate pub­lic ac­cess to the bureau’s data­base of con­sumer complaints, among other changes.

The let­ter was first re­ported by the Wall Street Jour­nal.

In Septem­ber, Wells Fargo agreed to pay $185 mil­lion to set­tle in­ves­ti­ga­tions into its sales prac­tices by the bureau, the Of­fice of the Comptroller of the Cur­rency and Los An­ge­les City Atty. Mike Feuer. The bank did not ad­mit any wrong­do­ing but said its em­ploy­ees had opened mil­lions of check­ing, sav­ings and credit card ac­counts that cus­tomers never au­tho­rized.

The scan­dal was made pub­lic by the Los An­ge­les Times in De­cem­ber 2013.

Con­gres­sional Repub­li­cans have said the con­sumer bureau failed to catch Wells Fargo’s prob­lems un­til The Times brought it to light and Feuer be­gan an in­ves­ti­ga­tion that cul­mi­nated in a 2015 civil law­suit.

“The only con­clu­sion there is to draw re­gard­ing the Wells Fargo scan­dal is the CFPB was asleep at the wheel,” Rep. Ann Wag­ner (R-Mo.) told Cor­dray dur­ing a con­tentious April hear­ing. “The L.A. Times, the [comptroller’s of­fice] and the L.A. city at­tor­ney all got there be­fore you did, Mr. Cor­dray.”

Cor­dray has tes­ti­fied that the bureau be­gan look­ing into Wells Fargo’s prac­tices af­ter re­ceiv­ing whistle­blower tips in mid-2013.

The House Fi­nan­cial Ser­vices Com­mit­tee has been in­ves­ti­gat­ing Wells Fargo’s prac­tices and the per­for­mance of reg­u­la­tors in the mat­ter. On June 6, the com­mit­tee staff is­sued a re­port say­ing the bureau has pro­duced no records in­di­cat­ing that it be­gan in­ves­ti­gat­ing the mat­ter be­fore Feuer filed his suit.

The re­port threat­ened Cor­dray with con­tempt of Congress for not pro­vid­ing doc­u­ments re­lated to the bureau’s Wells Fargo in­ves­ti­ga­tion that the com­mit­tee had sub­poe­naed.

The re­port said the bureau had turned over just 1,010 pages of records that du­pli­cated those pro­duced by the OCC and Wells Fargo. And the re­port said it has re­ceived no doc­u­ments cor­rob­o­rat­ing Cor­dray’s state­ments that the bureau had “en­gaged in su­per­vi­sory ac­tiv­ity” re­gard­ing Wells Fargo’s sales prac­tices be­fore Feuer filed suit against the bank in May 2015.

In his let­ter to Hen­sar­ling on Wed­nes­day, Cor­dray said the bureau had pro­vided the com­mit­tee with more than 57,000 pages of doc­u­ments “in an ef­fort to com­ply with the com­mit­tee’s broadly worded re­quests.”

Cor­dray said the bureau’s su­per­vi­sion of Wells Fargo’s prac­tices be­gan be­fore it for­mally con­tacted the bank about the prob­lems. Cor­dray said that he and the com­mit­tee staff “seem to have differing in­ter­pre­ta­tions of what is meant by the phrase ‘su­per­vi­sory ac­tiv­ity.’ ”

“We did not con­tact Wells Fargo di­rectly re­gard­ing these prac­tices un­til the spring of 2015,” Cor­dray wrote. But the bureau be­gan in­ter­nal work on the mat­ter in 2014 and its re­gional su­per­vi­sory staff made the de­ci­sion to sched­ule an ex­am­i­na­tion of Wells Fargo’s prac­tices in 2015.

Jeff Emer­son, a spokesman for Hen­sar­ling, said Mon­day that the ex­pla­na­tion fell short and “calls into ques­tion whether Di­rec­tor Cor­dray mis­led Congress.”

“The com­mit­tee can­not com­plete its Wells Fargo in­ves­ti­ga­tion un­til Di­rec­tor Cor­dray pro­duces all agency records sub­poe­naed by the com­mit­tee,” Emer­son said. “If Di­rec­tor Cor­dray truly wishes to cor­rect the record, he should stop ig­nor­ing his le­gal obli­ga­tions. What is he try­ing to hide?”

In the let­ter, Cor­dray more broadly de­fended his agency, not­ing that it only be­gan op­er­a­tion in July 2011 and its staffing was not up to full speed un­til 2014. Wells Fargo has said the prob­lem of unau­tho­rized ac­counts be­gan in 2002.

Alex Wong Getty Images

A LET­TER writ­ten by Richard Cor­dray, di­rec­tor of the Con­sumer Fi­nan­cial Pro­tec­tion Bureau, is the lat­est salvo in his bat­tle with Rep. Jeb Hen­sar­ling.

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