Fifth Third latest bank in CFPB crosshairs over phony accounts
The Consumer Financial Protection Bureau is continuing its crackdown on banks opening unauthorized accounts after Wells Fargo's phony-accounts scandal prompted the agency to investigate aggressive sales tactics at other institutions.
The latest institution in the bureau's crosshairs is Fifth Third Bancorp, which disclosed in a securities filing this week that the CFPB intends to file an enforcement action related to “alleged unauthorized account openings” at the Cincinnati bank. Last year the CFPB began investigating whether Bank of America also violated federal law by opening credit card accounts without customer authorization.
“My instinct is there are more actions coming” against banks, said Graham Scott Steele, director of the Corporations and Society Initiative at Stanford University's business school.
Bloomberg Law previously reported on Fifth Third's securities filing.
The $169 billion-asset bank says it plans to fight the action brought by the agency.
“Fifth Third believes that the facts do not warrant an enforcement proceeding and intends to defend itself vigorously if such an action should be filed,” the bank said in Monday's filing with the Securities and Exchange Commission.
Further details about the CFPB's allegations are unclear. Fifth Third spokeswoman Laura Trujillo said the bank will “fully cooperate with any regulatory and government inquiries,” but she would not say what types of accounts are under investigation by the CFPB.
Yet Steele noted that Fifth Third "always had a reputation for being aggressive" on consumer sales practices.
A 2016 survey of front-line bank workers conducted by Anastasia Christman, worker power program director at the National Employment Law Project, found that Fifth Third was one of multiple banks that had engaged in practices similar to those at Wells Fargo.
“It became clear that this strategy for growth was widespread across much of the industry,” Christman said. “Fifth Third was among the banks that employees complained about.”
In its filing, the bank also said that the impact of the potential enforcement actions “has been reflected in our reasonably possible losses,” and that “additional matters will likely arise from time to time.”
“Investigations by regulatory authorities may from time to time result in civil or criminal referrals to law enforcement,” the bank said in its most recent 10-K filing.
News of a potential enforcement action against Fifth Third comes as financial institutions are increasingly willing to challenge CFPB enforcement actions. In January, the CFPB filed a lawsuit against Citizens Bank over how it handled credit card fraud claims, but the bank said it would fight the action in court.
Christman said she is skeptical that CFPB probes of banks opening unauthorized accounts will curtail such practices.
“Doing this sort of after-the-fact investigation seems like closing the barn door after the horses have gotten out," she said. “Lawmakers and policymakers need to think about proactive moves to make sure consumers and employees are protected.”
Fifth Third recently converted to a national bank charter from a state charter in Ohio after it expanded into Texas and Colorado and completed its merger last year with Chicago-based MB Financial.
Because it was not previously supervised by the Office of the Comptroller of the Currency, the bank likely was not part of a broad examination by the national bank regulator in 2018 into whether more than 40 banks under the OCC's purview had also opened unauthorized accounts.
The OCC quietly ended that review of large and regional banks’ sales practices despite finding systemic issues including hundreds of problems at individual institutions. Instead of taking action publicly, the OCC issued warnings on industrywide issues that banks need to address.
“When the Wells action came out a number of regional banks came out and said they weren’t surprised,” said Steele. “The OCC’s review said there were weaknesses," but "they would not make anything public. We felt there could be another shoe to drop.”
The BofA investigation came to light when the CFPB posted documents online detailing how the Charlotte, N.C., bank petitioned to have the investigation closed, claiming the regulator’s demands were too burdensome.
CFPB Director Kathy Kraninger denied Bank of America’s petition in July.